Pur Autre Vie

We Are All Crabs on a Beach Under a Crashing Wave

2012-02-03T23:38:00.000-06:00

So I have been reading about Guatemalan atrocities. It seems as though Guatemala entered a kind of prolonged hell - constant violence, rampant crime, no one to trust, no justice.

I also recently read a book set in Nazi Germany. Again, a kind of hell. Resistance is futile (if morally mandatory), everyone is compromised. You really can't do much. If you fight back, you will quickly be crushed. If you don't help crush other people, you will be crushed. [Note: not all resistance was futile, of course. It's just that it took special circumstances for anyone to be able to accomplish anything worthwhile. Schindler and Duckwitz, yes, but not really von Stauffenberg. Nice try, though. Same for the Hampels (the subject of the book I read, Every Man Dies Alone.]

So, my theory: morality as punctuated equilibrium. Most moral decisions are minor. You shouldn't cheat on an exam, you shouldn't cheat on your taxes, you shouldn't cheat on your wife. These things really do matter, I don't mean to minimize them. But it's far more important to prevent Nazi Germany than it is to make some token resistance once Nazi Germany is in place. We avoid these ends by avoiding these beginnings, to quote (misquote?) Justice Jackson.

So my claim is simply, every once in a while, you face a decision on which a tremendous amount hinges. Usually, not much hinges on your decisions. And when you are in a "constitutional moment" (I've forgotten whom I'm plagiarizing here), it's pretty fucking crucial for you to be clear-headed and decisive. You've got to shoot Hitler in the face or issue a declaration calling for a general strike and a speech from Mikhail Gorbachev or something.

Again, it's not that morality doesn't matter in day-to-day life. But practical men are the slaves of defunct moral actors who seized the moment and changed history. Take a moment and be grateful that you live in a society where you don't have to make the compromises that the Guatemalans and the Germans had to make.

Slideshow

2012-02-03T21:53:00.000-06:00

And by another coincidence, the New York Times has a slideshow on the violence in Guatemala.

The Clinton Administration Being the Clinton Administration

2012-02-02T22:19:00.000-06:00

So, I swear the title of my previous post was a coincidence. I had no idea this happened:

In March [of 1999], President Bill Clinton visited Guatemala and, with President Arzú sitting in stony silence beside him, made an extraordinary apology for the decades of U.S. support of military dictatorships. "It is important that I state clearly that support for military forces or intelligence units which engaged in violent and widespread repression of the kind described in [a United Nations report, Memory of Silence] was wrong," he said. "And the United States must not repeat that mistake."

I suppose it's too late for Mitt Romney to give a speech attacking Clinton for the apology, but you never know. If he does, I hope someone brings up Rosario Godoy de Cuevas (and the hundreds of thousands of people like her).

Back Before the President was Always Apologizing for the U.S.

2012-02-02T21:56:00.000-06:00

It is important to remember this. From The Art of Political Murder, by Francisco Goldman:

Rosario Godoy de Cuevas spoke at Héctor Gómez's funeral, promising that his death would not be in vain. Three days later, Rosario, her young son, and her twenty-one-year-old brother were abducted from the parking lot of a shopping center. The next day her car was found flipped over in a shallow ditch by a road outside the city. The bodies of Rosario, her brother, and her child were inside. The government announced that it had been a tragic car accident, as did President Reagan's State Department spokesman, and the State Department spokesman's declaration, probably unnoticed by anyone in the United States, was repeatedly played on Guatemalan television.

The journalist Mark Fazlollah, later a distinguished reporter at the Philadelphia Inquirer, but at the time a young stringer, was staying in my house, and he decided to do some old-fashioned police reporting. He looked at the car the three had died in, and at the ditch where the accident had supposedly occurred, and concluded that the car had been rather gently rolled into it. He spoke to the doctor who had performed the autopsy confirming that the incident had been an accident. The doctor, who was soon murdered, could not bring himself to stand by his autopsy report. When Rosario Godoy de Cuevas's relatives went to claim her body at the morgue, they noticed that there were bite marks on her breasts. Her underpants were stained with blood, indicating rape. At the funeral, people noticed that her infant's fingernails had been torn out. The torturers would have done that, torn out the baby's fingernails while the mother was still alive, to try to get her to say whatever it is they wanted her to say.

Always lovely to see the Reagan administration being the Reagan administration.

Flinging Magnetic Curses

2012-01-24T01:43:00.001-06:00

So here's a random thought. What if for a long time capitalism was misunderstood and economic strength mismeasured? That is, what if everyone was impressed by tons of steel, miles of railroad track, etc., when really economic vitality was a function of much "softer," "squishier" factors? Basically people were in a sort of industrial, military mindset, ignoring the subtle work done by prices and incremental innovation. (The confusion could have arisen because associations were formed at a time when heavy industry really was at the cutting edge of economic growth.)

So everyone was subject to this delusion, but only the Communists had the misfortune to put it into action by centralizing their economies, building steel mills in their backyards, etc. My understanding is that Soviet accomplishments in heavy industry were actually quite impressive, though they weren't winning any sustainability awards. (It would be pretty awesome if they were, in fact, establishing and then rigging sustainability awards.)

But in the West, while people were generally just as deluded about what constitutes a strong economy, it didn't matter nearly as much: aside from a bit of protectionism, heavy industry was subjected to the same price discipline as everything else, and the economy kept advancing in spite of the misunderstanding.

I suspect this is anachronistic, and that in fact economists were pretty sophisticated about this stuff fairly early on. Keynes badly wanted to avoid wartime rationing by a program of forced saving, partly on the grounds that prices were still the best allocation mechanism, even in wartime. So anyway, just a thought.

5 Years of Solitude

2012-01-23T21:38:00.000-06:00

Matt Yglesias! If you read the University of Chicago Law Blog, you could have written today's post 5 years ago, when Randy Picker broached the issue of a Peltzman effect in lightbulbs. 5 years!

Like Flies in Saucers

2012-01-22T19:35:00.001-06:00

From Elif Batuman's The Possessed:

A famous professor of comparative literature had just read what struck me as an incredibly lame paper comparing a passage in Madame Bovary, in which flies are dying in the bottom of a glass of cider, to Babel's description of the death of Squadron Commander Trunov. (The similarity was supposedly that both Babel and Flaubert were aestheticizing the banal.) The moderator-my adviser, Monika Greenleaf-returning to the subject of those flies in the cider, had compared them to the inkwell full of dead flies at the miser's estate in Dead Souls, and also to Captain Lebyadkin's lyric about cannibalistic flies in a jar in Dostoevsky's Demons. I thought this was a much more promising line of comparison-in fact, Babel, too, had a passage about "flies dying in a jar filled with a milky liquid" in a Tiflis hotel. A beautiful passage: "Each fly was dying in its own way."

Perhaps the flies were unhappy.

But anyway, this reminds me of two further fly-related passages. The first is from "The Duel," by Chekhov:

And it seemed to her that all the evil memories in her head had taken shape and were walking beside her in the darkness, breathing heavily, while she, like a fly that had fallen into the inkpot, was crawling painfully along the pavement and smirching Laevsky's side and arm with blackness.

The second is from "The New Dress," by Virginia Woolf:

"We are all like flies trying to crawl over the edge of the saucer," Mabel thought, and repeated the phrase as if she were crossing herself, as if she were trying to find some spell to annul this pain, to make this agony endurable. Tags of Shakespeare, lines from books she had read ages ago, suddenly came to her when she was in agony, and she repeated them over and over again. "Flies trying to crawl," she repeated. If she could say that over often enough and make herself see the flies, she would become numb, chill, frozen, dumb. Now she could see flies crawling slowly out of a saucer of milk with their wings stuck together; and she strained and strained (standing in front of the looking-glass, listening to Rose Shaw) to make herself see Rose Shaw and all the other people there as flies, trying to hoist themselves out of something, or into something, meagre, insignificant, toiling flies. But she could not see them like that, not other people. She saw herself like that-she was a fly, but the others were dragonflies, butterflies, beautiful insects, dancing, fluttering, skimming, while she alone dragged herself up out of the saucer. (Envy and spite, the most detestable of the vices, were her chief faults.)

"I feel like some dowdy, decrepit, horribly dingy old fly," she said, making Robert Haydon stop just to hear her say that, just to reassure herself by furbishing up a poor weak-kneed phrase and so showing how detached she was, how witty, that she did not feel in the least out of anything. And, of course, Robert Haydon answered something quite polite, quite insincere, which she saw through instantly, and said to herself, directly he went (again from some book), "Lies, lies, lies!"

The fly motif continues throughout the story. I find it incredibly compelling.

Tolstoy Vey

2012-01-22T18:55:00.000-06:00

I've read that the Soviets promoted Tolstoy as the great Russian writer, presumably because of his ideological acceptability (perhaps they hadn't read Anna Karenina). I wonder how they felt about Hadji Murat during their adventures in Afghanistan.

While the World's Still Small

2012-01-22T18:50:00.000-06:00

So it turns out that Elif Batuman once nearly told a dirty joke in front of Joseph Frank, Dostoevsky scholar and subject of David Foster Wallace's essay "Joseph Frank's Dostoevsky":

The joke involves the comic exchange between Thor and a farmer's daughter. "I AM THOR!" says Thor, to which the farmer's daughter replies: "I'm thor, too, but I had tho much fun!"

"So Thor comes down to earth for a day," I began, when I suddenly became conscious that Joseph Frank-the Stanford emeritus famous for his magisterial five-volume biography of Dostoevsky-had abandoned the lively discussion he had been having with a Berkeley professor about Louis XIII. Both were regarding me from across the table with unblinking interest.

"You know," I said to Anna, "I just remembered it's kind of an inappropriate joke. Maybe I'll tell you another time.

And but so, although he doesn't come out and say it in the essay, I get the sense that Wallace was a Dostoevsky partisan in the bitter Tolstoy/Dostoevsky debate. ("You need only compare the protagonists' final conversions in Tolstoy's The Death of Ivan Ilyich and FMD's Crime and Punishment in order to appreciate Dostoevksy's ability to be moral without being moralistic.")

(A macabre sidenote: DFW wrote the essay when Frank had published only four volumes of the biography, and DFW speculated about whether Frank would live to publish the fifth. He did - almost a year after DFW's suicide.)

Personally I don't think Dostoevsky can hold a candle to Tolstoy. This passage from Life and Fate by Vasily Grossman spells out the thoughts of a fellow Tolstoy advocate (a more ardent one than I):

Karimov turned to Madyarov.

'Leonid Sergeich, how can you reconcile your earlier hymn to Dostoyevsky with this passionate speech in praise of Chekhov and his humanity? Dostoyevsky certainly doesn't consider everyone equal. Hitler called Tolstoy a degenerate, but they say he has a portrait of Dostoyevsky hanging in his office. I belong to a national minority myself. I'm a Tartar who was born in Russia and I cannot pardon a Russian writer his hatred of Poles and Yids. No - even if he is a genius. We had more than enough blood spilt in Tsarist Russia, more than enough of being spat at in the eye. More than enough pogroms. A great writer in this country has no right to persecute foreigners, to despise Poles and Tartars, Jews, Armenians and Chuvash.'

The grey-haired, dark-eyed Tartar smiled haughtily and angrily - like a true Mongol. Still addressing Madyarov, he continued:

'Perhaps you've read Tolstoy's Hadji Mourat? Perhaps you've read The Cossacks? Perhaps you've read the story "A Prisoner in the Caucasus"? They were written by a Russian count. While Dostoyevsky was a Lithuanian. As long as the Tartars remain in existence, they will pray to Allah on behalf of Tolstoy.'

Viktor looked at Karimov, thinking: 'Well, well. So that's how you feel, is it?'

(Note: I can't vouch for the Hitler thing.)

Karimov's peroration reminds me of Elif Batuman's blog post on Michael Steele's mangling of the opening line of War and Peace, which includes this aside: "Note to self: could the entire dissatisfied-Muppet/ Grover relationship be based on the tense interchange between Oblonsky and the Tartar waiter?"

Batuman goes on to discuss DFW in the comments section to the post.

Alienation

2012-01-22T17:26:00.001-06:00

From The Possessed, by Elif Batuman:

While it's true that, as Tolstoy observed, every unhappy family is unhappy in its own way, and everyone on planet Earth, vale of tears that it is, is certainly entitled to the specificity of his or her suffering, one nonetheless likes to think that literature has the power to render comprehensible different kinds of unhappiness. If it can't do that, what's it good for? On these grounds I once became impatient with a colleague at a conference, who was trying to convince me that The Red Cavalry cycle would never be totally accessible to me because of Lyutov's "specifically Jewish alienation."

"Right," I finally said. "As a six-foot-tall first-generation Turkish woman growing up in New Jersey, I cannot possibly know as much about alienation as you, a short American Jew."

He nodded: "So you see the problem."

I note in this regard that apparently Joseph Heller chose the name "Yossarian" to emphasize the character's alienation. It seems that Heller was going to give the character a Jewish name, but that by the time the book was published, Heller didn't feel that a Jewish name would convey sufficient alienation from American society.

[EDIT: as I have joked before, it would be funny if Tolstoy gave Levin his name for the same reason. Apparently at one point he was going to call the character Lenin, which would definitely have changed the book and may have changed history.]

Sidetracked Down the Middle

2012-01-22T13:12:00.000-06:00

So I guess add "campanilismo" to the list of words with surprisingly recent origins. I wish I knew how to embed the images properly, but Google Ngram Viewer supports the thesis that "sidetrack" and "campanilismo" emerged after the advent of railroads and time zones respectively: sidetrack and campanilismo.

By the way, I am not sure that Kindleberger correctly characterized the International Meridian Conference, but I am far too lazy to investigate further.

The Annihilation of Space by Time

2012-01-22T12:38:00.003-06:00

Two passages on the innovation of time zones. First, from Nature's Metropolis, by William Cronon (which I cannot recommend highly enough):

The most dramatic proof that this new universe had extended its influence to the outside world came in 1883, when the major railroad companies imposed on North America new, "standard" times to replace the hundreds of "local" times which had previously been used to set clocks throughout the country. Before the invention of standard time, clocks were set according to the rules of astronomy: noon was the moment when the sun stood highest in the midday sky. By this strict astronomical definition every locale had a different noon, depending on the line of longitude it occupied. When clocks read noon in Chicago, it was 11:50 A.M. in St. Louis, 11:38 A.M. in St. Paul, 11:27 A.M. in Omaha, and 12:18 P.M. in Detroit, with every possible variation in between. For companies trying to operate trains between these various points, the different local times were a scheduling nightmare. Railroads around the country set their clocks by no fewer than fifty-three different standards-and thereby created a deadly risk for everyone who rode them. Two trains running on the same tracks at the same moment but with different clocks showing different times could well find themselves unexpectedly occupying the same space, with disastrous consequences.

And so, on November 18, 1883, the railroad companies carved up the continent into four time zones, in each of which all clocks would be set to exactly the same time. At noon, Chicago jewelers moved their clocks back by nine minutes and thirty-three seconds in order to match the local time of the ninetieth meridian. The Chicago Tribune likened the event to Joshua's having made the sun stand still, and announced, "The railroads of this country demonstrated yesterday that the hand of time can be moved backward about as easily as Columbus demonstrated that an egg can be made to stand on its end." Although the U.S. government would not officially acknowledge the change until 1918, everyone else quickly abandoned local sun time and set clocks by railroad time instead. Railroad schedules thus redefined the hours of the day: sunrise over Chicago would henceforth come ten minutes sooner, and the noonday sun would hang a little lower in the sky.

. . . .

The isolation that had constrained the trade and production of frontier areas would disappear in the face of what Karl Marx called "the annihilation of space by time," the tendency of capitalism's technologies and markets to drive "beyond every spatial barrier." Wherever the network of rails extended, frontier became hinterland to the cities where rural products entered the marketplace. Areas with limited experience of capitalist exchange suddenly found themselves much more palpably within an economic and social hierarchy created by the geography of capital.

And from International Money, by Charles Kindleberger (confusingly, not available in a Kindle version):

A few years ago, the brilliant Swiss journalist Herbert Luethy wrote a book on France (in the American edition, France Against Herself), with the title in French A l'heure de son clocher (Each clock on its own time). The reference was to France before its postwar economic upsurge. The Italians have a similar expression, campanilismo, which emphasizes the separateness of individual villages, each regulated by the campanile, or bells of the village church. In primitive economies time stands still or goes its separate ways. In a modern, interdependent economy, by contrast, time not only flies or marches on; it does so in unison.

. . . .

At the micro-temporal level, the optimum time zone is smaller than the world but bigger than the locality. Greenwich Mean Time dates from 1675, but British cities continued to operate independently of one another chronometrically until about 1800. The clocks of Plymouth, in the west of England, for example, ran sixteen minutes later than those of London.

The railroads changed all this. G. M. Young has explained that railroad timetables rendered the English middle-class public conscious of precious time and disposed to carry watches. The twenty-four hour gate clock on the Royal Observatory building in Greenwich was installed in 1852 to measure time for Great Britain. North American railroads found it desirable to adopt not only the British standard gauge of track width, but also time zones based on Greenwich. Greenwich finally came into its own as the international time standard at a conference held in 1884 at Washington. The need for such a world standard arose from the increased speed of steamers equipped with screw propellers, which crossed the Atlantic in days instead of weeks.

Fixed time zones are analogous to stable exchange rates, and both were increasingly needed, in the last quarter of the nineteenth century, to accommodate the substantial and rising volume of world trade.

The Only Thing that Justifies Our Presence on the Earth

2012-01-19T22:31:00.001-06:00

Inspired by the two saddest songs according to Elisa, here are my own choices:

"Us Ones In Between" by Sunset Rubdown (ignore the sappy text, which is not by Sunset Rubdown - or don't):

"Cocaine and Ashes" by Son Volt:

Practically all of "Yankee Hotel Foxtrot" by Wilco would also qualify. What can I say, downstate Illinois boys know how to make me sad.

Also Ashokan Farewell, but that is probably because of its indelible association with Ken Burns's Civil War documentary.

[Edit: damn it, I forgot some good ones, which I've added below]

"Carry Me Ohio" by Sun Kil Moon:

"MAPS" by the Yeah Yeah Yeahs:

Train Queue

2012-01-17T22:58:00.000-06:00

I hate Penn Station. I hate that it used to be beautiful and now it is a dump, but these things happen. What really drives me crazy is that it is not set up for people to queue. You actually wait in a huge room, and when the gate is announced, you join the crush of people forming a huge blob at the escalator to the train platform. It is hugely and needlessly stressful and unpleasant.

Rates of Change

2012-01-13T16:06:00.000-06:00

Matt Yglesias works to bolster his detractors and undermine his defenders by failing to recognize the difference between prices and inflation. Yglesias quotes Richmond Federal Reserve Bank President Jeffrey Lacker saying that the Fed's job is to "keep inflation low and stable." In fact, Yglesias notes, the mandate is (per a FAQ on the Fed's website): "maximum employment and stable prices." Yglesias concludes that inflation should be steady, not necessarily low.

Okay, but. Inflation is a rate of change. If prices are to be steady, then inflation will need to be pretty low. One would not consider prices to be steady if they were increasing at a 1,000% annual rate, though inflation could be very steady in those circumstances.

Just . . . sigh.

Time is in the Air

2012-01-03T06:49:00.000-06:00

Ramblings about time and politics are in the air, as Matt Yglesias speculates that time zones would be highly controversial if proposed today (to some extent Yglesias's point is about the dysfunctional nature of modern politics). Yglesias links to an Alex Tabarrok post noting his (Alex's) appreciation for daylight saving time notwithstanding that his ideology would probably lead him to oppose it a priori.

Time zones seem like an easy case to me, since most people like them, the benefits from coordination are significant, and they can be implemented in a fairly arbitrary manner without losing their benefits. They are a bit like driving on the right side of the road. Hardcore libertarians may think coordination would arise naturally in a decentralized market-driven manner, but most people like traffic laws, and the same goes for time zones.

Daylight saving time is a harder case, since a lot of people despise it (some political units actually opt out) and the public policy rationale is less clear. It seems fairly non-coercive to me, but one could argue that the coordination of expectations is one of the most coercive things a government can do. (As noted previously, the analogy to monetary policy is striking.)

The Inevitability of Coordination of Economic Activity

2011-12-30T18:24:00.003-06:00

Incidentally, I think my previous post on time and money points the way to a fairly deep point about society - the extent to which "nominal" coordination is necessary in order to achieve "real" outcomes, and the trade-offs that arise.

Some libertarians take the view that people should simply be left to their own devices. Coordination will spontaneously emerge thanks to the invisible hand, etc. etc.

In my view, this is unrealistic both as a description of how coordination is achieved and as a concept of how it could be achieved in an ideal world. I think coordination is a central problem of modern society and that it is inherently political. Of course, the government need not be the institution doing the coordinating. But coordination is pervasive, and no matter who does the coordinating, it will favor some and not others.

By way of example, think about a futures market. The idea is that you have defined contracts specifying the commodity, the quantity, the quality, and the time and place of delivery. The seller undertakes to provide the commodity at that time and place, and the buyer undertakes to pay for it. (The contract doesn't specify the price, which is established on an exchange.)

Very well. This can all be arranged without government help (although of course it probably helps to have a general background of legally-protected property rights and contract enforceability).

But who defines the contracts? You might think that you could have infinitely many contracts, varying continuously along all dimensions, but that's not the case. For contracts to be traded anonymously on an exchange, you want liquidity, which means you want to coordinate on a few specified contracts to the exclusion of others. So you have a few grades of each commodity, and a few places of delivery (famously, West Texas Intermediate crude oil is deliverable at Cushing, Oklahoma). As Canadian grain farmers are gaining the ability to sell their grain to anyone, and not just the Canadian Wheat Board, they will have to consider which futures contract makes the most sense for them, since they can't each write a contract that meets their precise needs. I read a Wall Street Journal story indicating that exchanges are competing on the basis of what contracts they support - some support Canadian-dollar-denominated contracts, others don't. (Sorry, no link - it was in the December 23 issue, I think.) Farmers are thinking about how much they care about liquidity vs. how much they care about the quality of the hedge. (A contract deliverable in Chicago is probably a better hedge than a contract deliverable in Los Angeles, even though the grain itself might be delivered to Toronto. I am making this example up, but you get the idea.)

Now, note, no one is forced to use the futures market, as far as I know. It's purely voluntary. And yet I'm guessing that lots of people who don't trade futures pay attention to the prices on the exchanges, and I'm guessing that farmers know how to optimize the grade of grain that they ship to market, based on the relative prices of the different contracts (or maybe just based on the contract specifications generally). That is, a lot of "real" activity goes into conforming economic activity to the "nominal" coordination achieved by the futures market. Another way of putting it is that conforming to the market standard may be voluntary in the legal sense, but it is compelled by economic logic. And therefore a standard that is in no way compulsory ends up affecting behavior, just as daylight saving time affects when people wake up (even people whose jobs do not require them to show up at work at any particular hour).

Anyway, my bigger point is, contracts could be defined well or poorly, but they have to be defined, and people will have different preferences about those definitions. My broader point is that a lot of human activity benefits tremendously from coordination of one kind or another, and I think libertarians are naive to think that all of this can be achieved in a decentralized way. The question facing modern society is not whether or not to have a leviathan, but how to choose (or design), monitor, and control that leviathan for our collective benefit. (Again, the leviathan need not be the government - it could be the clearinghouse, or the CGPM, or whatever.)

But so, these decisions implicate people's interests, and so they are political, and so we probably need political institutions to deal with them. Often, the government is well-situated to play this role. If someone is going to crush your liberty, it might as well be someone subject to public scrutiny and competitive elections, and bound by a written Constitution and norms of fairness and democracy. But, you know, not always. We have other good institutions with roles to play - the market, academia, etc. And so you end up with the "ideological division of labor" among the institutions at our disposal. I think some libertarians imagine they can avoid playing this game, but they can't. Society will be coordinated. But how and by whom, and in whose interest?

[Update: Another way of making this point is to think about whether socially-imposed conventions such as time zones, currencies, language, standardized weights, etc. make the economic calculation problem easier or harder. If the answer is "easier," then perhaps the economic calculation problem is not the all-purpose libertarian argument that it might seem to be on first glance.]

Some Ramblings on Time and Money

2011-12-30T17:11:00.000-06:00

Tyler Cowen at Marginal Revolution links to a piece in Wired about a new proposed calendar and timekeeping convention (he also links to a Cato post promoting the scheme). I will ignore the proposed calendar and focus on the timekeeping convention.

The basic idea is to force everyone to use Greenwich Mean Time, with no adjustment for daylight saving time (which would be abolished). So if it is 11 a.m. on Sunday in London, it is 11 a.m. on Sunday everywhere. (There would be no international date line, as the entire world would simultaneously pass from one day/date to the next.)

Obviously, people would not be compelled to keep their current daily schedules (e.g., getting up at 7 a.m. and going to sleep at 11 p.m.). Rather, it is anticipated that many people would wake up in the "astronomical" morning and go to sleep at "astronomical" night, regardless of the nominal time. (So for instance, a New Yorker might wake up at noon and go to sleep at 4 a.m., as this would correspond to 7 a.m./11 p.m. as currently denominated.)

What I find fascinating about this suggestion is something that its proponents seem to find uninteresting: the question of how "nominal" time may or may not have "real" consequences. Here's one of the proponents, Richard Henry, describing how he responded when a child told him she didn't like his calendar scheme:

And I said, ‘Why?’ She said, ‘My birthday is always going to be on a Thursday.’ I said, ‘You’re free to celebrate when you want! What the devil difference does it make what it says on the calendar?’

All right, so, one might ask Henry why he cares about timekeeping conventions at all. What the devil difference does it make what it says on the clock? I have a digital scale in the kitchen, and by pressing a button I can switch back and forth between metric and imperial units. With digital timekeeping, one could in principle do the same thing. And then it is very difficult to see why the "nominal time" would matter at all. (Already it is easy to find websites to convert between time zones, and in fact in some places there are multiple clocks on the wall for this purpose - some watches even have this feature.)

The answer, presumably, is coordination. The shift to time zones apparently took place because trains kept slamming into each other (or at least that's what I remember reading in Nature's Metropolis by William Cronon). (Previously, a local official computed noon the old-fashioned way and set a clock accordingly - therefore, time varied continuously, not discretely, with longitude. Or more precisely, there were a lot more discrete time zones, so that it verged on continuity. In jest, I once imagined exactly such a system, not realizing it was the status quo before the 19th century. Anyway you can see how difficult it would be to formulate train schedules in such an environment.)

So then to me, the interesting discussion is how much coordination matters - how much do nominal changes in timekeeping conventions affect real behavior? The answer seems to be "a lot," but it would be fun to look into this more closely.

But so anyway, it seems to me that these guys want it both ways. On the one hand, they claim that with their timekeeping convention Russia could coordinate banking hours across the country. On the other hand, if you don't like any of the perceived consequences of the system, then those consequences are treated as merely nominal changes that will not compel any change in behavior. Celebrate your birthday anytime you want, regardless of what the calendar says! What the devil difference does it make?

One could just as easily say, "What the devil difference does it make to banking hours in Russia? Just dictate their hours in Moscow time!" That is, if you want all the banks to be open at once, you hardly need to reformulate your entire conception of time in order to make it happen. In Soviet Russia, clock adjusts you for daylight saving time!

All right, so, all of this is by way of setting up an interesting analogy to monetary policy, a metaphor famously drawn by Milton Friedman (as related by Paul Krugman in the New York Times Magazine):

Back in 1953, Milton Friedman offered an analogy: daylight saving time. It makes a lot of sense for businesses to open later during the winter months, yet it’s hard for any individual business to change its hours: if you operate from 10 to 6 when everyone else is operating 9 to 5, you’ll be out of sync. By requiring that everyone shift clocks back in the fall and forward in the spring, daylight saving time obviates this coordination problem. Similarly, Friedman argued, adjusting your currency’s value solves the coordination problem when wages and prices are out of line, sidestepping the unwillingness of workers to be the first to take pay cuts.

This is pretty fascinating, as it again touches on the question of how nominal values can affect real outcomes. I want to think about it some more.

Anyway, I was a little surprised to see the abolish-time-zone scheme promoted on the Cato website - are time zones and daylight saving time now seen as socialist endeavors? Certainly I think there is a strong conservative distrust of any claim that nominal changes can have real-world consequences. I suspect that there is a psychological thread that connects the gold-bug obsessions of the modern GOP, sentiment against daylight saving time, and ultimately the desire to abolish time zones entirely. If the government can't meddle with time or money, we will be on our way to true freedom! Or at least off the road to serfdom.

Geography is Destiny

2011-10-24T20:11:00.003-05:00

I came across a great passage from Life and Fate, by Vasily Grossman, describing an elderly gentleman who, in his youth, was exiled to Tashkent by the Tsarist government for subversive teaching. Eventually he returned to Russia and was the only landlord (in his district, I presume) who was left unmolested in the Revolution. But:

In 1926 Shargorodsky took it into his head to give lectures on the history of Russian literature; he attacked Demyan Byedniy and praised Fet; he took part in the then fashionable discussions about the beauty and truth of life; he declared himself an opponent of every State, declared Marxism a narrow creed, and spoke of the tragic fate of the Russian soul. In the end he talked and argued himself into another journey at government expense to Tashkent. There he stayed, marvelling at the power of geographical arguments in a theoretical discussion, until in late 1933 he received permission to move to Samara to live with his elder sister, Elena Andreevna.

Grossman's prose can't be compared to Tolstoy's, but it has its moments, and Life and Fate packs a lot of truth into 871 pages.

I Heard Ol' Neal Put Her Down

2011-10-15T09:46:00.003-05:00

A few weeks ago everyone was linking to this Neal Stephenson essay on innovation, mostly approvingly (I didn't see any disapproving commentary, anyway).

My own thought when I read it was Nehru's infamous (and possibly apocryphal) remark that "dams are the temples of modern India." By which I mean, Stephenson's examples of innovation are projects carried out on an epic scale, with little emphasis placed on their effect on human welfare. One gets the sense that space travel looms far larger to Stephenson than an innovation like oral rehydration therapy.

Stephenson cites the legal system as an impediment to innovation (even making the bizarre claim that minority shareholders would take legal action against a corporation investing in long-term innovation). That makes it all the more puzzling that Stephenson doesn't discuss legal or social innovation. After all, there are innovative ideas for reform of the patent system, and a legal innovation called the business judgment rule shields corporate directors from liability when their decisions turn out to be unprofitable, as long as those decisions met certain requirements.

Admittedly, there's a sense in which an innovation like flexicurity is less impressive than sending a man to the moon, but in many ways social innovations are more complicated and more difficult than massive engineering projects. They are also more crucial to continuing advances in human welfare. If you go to India today, it probably won't even occur to you to visit a dam, but you won't be able to avoid signs of the market and social innovations that have transformed the country.

It's a Trappist Ale!

2011-10-15T09:43:00.003-05:00

Headline on the NY Times website right now: "Cardinals Don't Waste Off Night by Brewers." I like to imagine a bunch of Catholic officials lounging around in a cathedral, shifting from beer to wine so as not to let the brewers' off night spoil the fun.

Los Gatos Gordos

2011-10-05T20:34:00.004-05:00

Yglesias has a post about right-wing populism:

A right-leaning populism would start from the (accurate) premise that some of the privileges of the few derive from their use of the power of the state and would seek to dismantle these instances of big government privilege. But who is doing this? You can read a fair number of blog posts and even the occasional speech or article about it. But where’s the governor or mayor who’s going to town on this agenda and succeeding? Clearly there are any of number of people who you might claim have done something or other along these lines. But generally speaking GOP governors seem pretty focused on making the tax base regressive and cutting social services for the poor.

The answer to Matt's question - who is doing this? - is that, by the lights of American conservatives, Wisconsin Governor Scott Walker is doing this. What Matt fails to appreciate is that to the conservative movement, public-sector employees are the privileged few. The abusers of government power. The fat cats.

I don't really want to address the merits of this viewpoint. But Yglesias is being disingenuous - he might as well say, "Are there any conservatives out there who are admirable from a liberal perspective, he asked, expecting the answer no?"

Nothing But Data

2011-09-17T20:44:00.006-05:00

This post is about a forum post on teamliquid.net. The rest of my post won't make sense unless you've read the post, so I suggest you read it and come back.

I think the teamliquid post neatly illustrates the necessity for both empiricism and analysis - you generally can't get far with one if you ignore the other. However, I should preface what I say: I think the post is a good post, and I'm glad it was written. I just don't think it can support the weight that is being placed on it (for instance, commenters went so far as to try to find a way to calculate "SQ" in SC2 Gears - alas, apparently this isn't feasible).

So let's get to my main criticism of the post: it derives a metric called the Spending Quotient (SQ) and implies that SQ measures "macro skills" - the ability to obtain and spend resources efficiently. But the post offers only tenuous support for the idea that a player should specifically try to maximize SQ.

Here's an analogy that will apply to the rest of my post. Arthur Okun described a metric called the "misery index," intended to measure the harm caused by unemployment and inflation. The misery index is calculated by adding the unemployment rate to the inflation rate. Now, imagine that Okun had published a forum post on teamliquidity.net, describing the misery index. Should central bankers respond by minimizing the misery index as a matter of policy?

Well, no, because the misery index has little normative weight. It combines two things that are generally undesirable above a certain level and calls for minimizing them. But the weight that it attributes to unemployment and inflation is arbitrary.

SQ has this quality as well, although the forum post goes to some length to justify the relative emphasis that it puts on unspent resources and average income. The question is whether the post gets from point A to point B, and I think the answer is no. But quickly, without referring back to the teamliquid forum post, see if you can connect the dots yourself: what is it about SQ that is supposed to be meaningful, beyond the fact that unspent resources should generally be kept low and average income should generally be kept high?

I think the answer, if you tease it out, is that within each league there seems to be a relationship between unspent resources and average income, and SQ essentially represents movements that are perpendicular to the resulting isoquant (changes in SQ represent shifts between leagues, while movements along the isoquant represent different games within a league). Increasing SQ is therefore supposed to be the most efficient way to climb from one league to another.

Now bear in mind, it's uncontroversial that it's generally best to minimize unspent resources and maximize average income. If I post a graph like this:

and I tell you to generally move ~~up and to the left~~ down and to the right [oops!] in order to improve, that is not interesting. What is interesting is that whatthefat (author of the forum post) has derived a mathematical formula that purports to quantify the relative importance of improvements in unspent resources and average income.

So, what's the matter with drawing the arrow that seems like the most direct path from one league to another? Well, this depends on the assumption that there is a causal relationship between SQ and winning. Causation is always a slippery concept that leans heavily on intuition, but there are several problems with the causal story that whatthefat is implicitly telling (whatthefat never get beyond the observation that higher-league players have higher SQs, so any causal connection is left to the reader to sort out):

1. The measure of SQ will depend not only on the player's performance but on the duration of the game and the course of events within the game. Thus, SQ could vary between leagues entirely as an environmental factor and we wouldn't be able to detect this from whatthefat's data.

2. In a very odd omission, whatthefat neglects to use the available data to test the causal effect of SQ. After all, whatthefat has the win/loss data for each game. Does a player win more often when his SQ is higher? whatthefat knows (or could know), but we don't. (It would also be interesting to see if the player with the higher SQ in each game won. whatthefat didn't compile data to calculate the opponent's SQ - why not? - so this is unkknowable.)

3. Note that, if you take SQ to be a measure of macro skills, a bronze player will regularly out-macro a diamond player, and a bronze player will out-macro a grandmaster league player a non-negligible amount of the time:

What this implies is that the variance in SQ is quite high, which probably indicates that it fails to isolate macro skills and is instead picking up a lot of noise. Whether game-to-game changes in SQ are meaningful is not clear.

So to sum up, I think whatthefat gets credit for compiling useful data but has not persuasively shown that SQ is a useful derivation of that data. Any formula that tells you to minimize unspent resources and maximize average income is going to be "useful." To treat SQ as being useful, beyond the fact that it increases with respect to average income and decreases with respect to unspent resources, would require a demonstration that it contributes to winning. whatthefat doesn't provide any such demonstration, and so we are left with our own personal intuition on the subject. Mine is that SQ is the StarCraft analogue of the misery index, and that StarCraft players would be well-advised to ignore it and focus on the known contributors to winning.

Oh the Things You Will See

2011-09-15T17:43:00.003-05:00

9/11 and the Banality of Goodness

2011-09-11T14:08:00.002-05:00

I don't have a lot to say about 9/11 that hasn't been said elsewhere. I think what was startling for me about 9/11 was the way it brought good and evil to the surface after a long period of what felt like the heat death of morality. (I am thinking in particular of the ubiquitous cable news coverage of the various scandals of the Clinton administration.) The other striking thing was the asymmetry of the attack - the attackers themselves died, but the planners seemed remote and invulnerable. The attacks therefore felt like a "poor man's cruise missile." (I suppose these days the proper analogy is an unmanned drone.) That second aspect has largely been eliminated by the assassination of Osama bin Laden, though it remains true that he waged a form of asymmetrical warfare against us for more than a decade.

Anyway, I think everyone can find something to regret about the years that followed 9/11, even if you don't take quite as cynical a view as Paul Krugman. Personally, I find it striking how quickly our national mood of solidarity and determination faded into everyday concerns. Perhaps inevitably, things have slid back toward the heat death of morality. Our political culture continues to be obsessed with trivia and paranoia. I work at a big law firm. Howard Dean is a lobbyist.

Largely speaking, I don't think it could have been otherwise. The United States does not deploy its power outside of the political sphere, and democratic politics is inescapably pedestrian. This is how we address good and evil in this country (and in any democracy) - piecemeal and as necessary.

This all brings to mind Francis Fukuyama's book The End of History and the Last Man. I haven't read the book, so I'll take Matt Yglesias's word for it that recent events have bolstered, rather than undermined, Fukuyama's thesis. I guess I think people probably misunderstand the book because the title uses the word "history" in a rather non-intuitive way. The idea, I take it, is that liberal democracy is a more or less stable equilibrium and that social forces are pushing (slowly and fitfully) toward its universal adoption. The End of the Cold War. Fukuyama is not committed to the idea that historical events will become less common or less tectonic.

Taking this to be broadly true, if rather less interesting than Fukuyama's title implies, I think that what stands out about 9/11 is precisely how unusual it was. We paid a lot more attention to 9/11 than the raw number of deaths would seem to call for, and rightly so. But the events since then have not in any noticeable way escaped what I take to be the Fukuyama framework. The big issues are overwhelmingly political or technocratic. We are contemplating the breakup of the eurozone and bickering about Chinese macroeconomic policy. Even war and peace are relegated to the compromises of partisan politics (as in Egypt, where, as I understand it, the center-right Muslims have thoroughly consolidated power).

I think the lesson is that good and evil are neither so terrible nor so gripping as we thought after 9/11. We will continue to build a better society, if at all, not in a grand sweeping gesture but brick by brick. On 9/11, we were all Americans, but it turns out that on a daily basis we are all Dutch. Issues will be complicated and small-bore and endlessly ramifying, and the challenge will not be to rise to the occasion but to stay engaged at all. That's life in a "post-historical" world. What I hope is that 9/11's call to morality will remain strong enough that it will withstand the sordid realities of democratic politics. We shouldn't expect transcendence, but nor should we concede the struggle. The terrorists were wrong and we are good and we must do the hard work of preserving and proliferating our good society.

The NRA's Broad Conception of Liberty

2011-09-10T12:14:00.003-05:00

Florida has passed a law overriding local gun ordinances. ("Good man! Nixon's pro-ordnance and anti-ordinance.") Just another reminder not to set foot in Florida under any circumstances.

Now, I don't know if, as the NY Times claims, it is legal to fire a gun up into the air in Florida (at least, the article claims that municipal governments can't ban that activity). I do know that it is a felony to do so in Arizona. The law was passed over the objection of the NRA after a 14-year-old girl named Shannon was hit in the head by a stray bullet, dying instantly.

So leave Florida aside for the moment. The idea that it should be legal to fire a gun indiscriminately into the air is an interesting test case for libertarianism. (Note that the status quo was that this was at most a misdemeanor, so maybe the NRA just didn't want people to face felony charges for the activity.) I can see a few possible avenues of thought.

1. The government has no business regulating when and where individuals fire their guns. The tort system is sufficient to ensure that the socially optimal number of 14-year-olds are gunned down each year. (That is, if the victim's estate can prove who fired the gun and that doing so was negligent, and can prove up the damages, then it can get a judgment against the killer. Assuming the tort system gets the level of damages right, the victim's family/estate will be indifferent between the life of the victim and $x, where x is the level of damages. Also, gun owners will have to balance the utility from firing their guns into the air against the possibility of tort liability, and some will be deterred.)

2. Even tort liability for indiscriminate gunfire is an illegitimate curb on liberty - it's government regulation via a different channel. Road to serfdom, who is John Galt, etc.

3. Libertarianism doesn't imply that there should be no restrictions on human behavior, and it is perfectly legitimate to restrict behavior when it imposes costs or risks on others.

So anyway, food for thought. Personally I find the first and second versions of libertarianism to be somewhat unappealing, and I suspect that the third version quickly devolves into standard mainstream public policy and bears little resemblance to "libertarianism" as the term is used today. But then, admittedly I would never want to fire a gun indiscriminately into the air in the first place, so it's a bit like asking a poor person whether capital gains taxes are an execrable infringement on liberty.

Today's Headline

2011-09-03T12:49:00.002-05:00

"Stung by the Obama, Environmentalists Weight Their Options"

The actual article has a more normal headline, this is just what the Times put on the front page.

Principle Write-downs

2011-08-25T09:55:00.003-05:00

Yesterday we observed Megan McArdle claiming that "as a matter of principal," the Constitution should prohibit laws that require people to use markets. Today we have Matt Yglesias writing about the liberal desire for "principle write-downs."

I love the concept of a principle write-down. I suppose sometimes that's the only way to avoid moral bankruptcy.

Lapsing into Speechlessness

2011-08-24T19:21:00.006-05:00

I am not a complete fatalist when it comes to the power of logic in political debate, but I do get pretty pessimistic sometimes. The latest example is this from Megan McArdle: "As a matter of principal, I think that our constitution should not permit laws requiring people to buy services from private parties."

Okay, that sounds like the kind of principle a reasonable person might build into the Constitution. But wait - should the government be able to:

1. require drivers to maintain liability insurance? (seems like a good policy - get it?)

2. require litigants to file paper copies of their pleadings? (Or require paper copies of tax returns to be filed? Bear in mind that the internet is only a few decades old while the Constitution has been around since the 1800s.)

3. require people to put their dogs on leashes in public spaces?

4. require vaccination of dogs?

5. require people to wear clothes?

6. require building owners to maintain fire extinguishers?

7. require corporations to hire boards of directors?

8. require financial institutions to maintain segregated bank accounts?

And so on. A huge amount of economic activity in this country is carried out in the private sector, which means that a lot of laws will directly or indirectly require people to participate in markets. And I truly can't comprehend why anyone would want it to be otherwise. Particular laws may be annoying - who knows, maybe nudity laws should be constitutionally prohibited. Maybe leash laws are silly. But to say that these laws are wrong as a matter of principle because they require people to engage in market transactions strikes me as so utterly wrongheaded that I can't begin to think how I would formulate a logical argument against it. I suppose I could make consequentialist arguments about whether it's a good idea to force most economic activity into the public sector, but mostly I think I would just keep listing examples and sputtering.

[note: edited post to make it funnier, in my opinion]

Nothing is Shit Anymore

2011-08-23T16:42:00.004-05:00

One of Tony Soprano's refrains is, "Everything turns to shit," which I find highly compelling. But there is a countervailing tendency to re-imagine cultural products in such a way that they are stripped of their gloom. Think of the British "Office" vs. the American "Office." The U.K. version is pretty emphatic about the inescapable shittiness of life. The U.S. version is so much sunnier that it's barely recognizable.

SPOILER ALERT - DO NOT READ FURTHER AND DO NOT WATCH THE VIDEO IF YOU HAVEN'T READ INFINITE JEST

This came to mind when I watched the Decemberists' video for their new "Calamity Song":

To me, this video feels very appealing, but it also feels like a violation. I want to grab the Decemberists and shake them and tell them to read the fucking book. Again, if necessary. This is not Infinite Jest. This is not Eschaton.

But the video does appear to capture what Colin Meloy says he was going for:

Despite the grim stakes that are implied by Eschaton, Mr. Meloy said there was "almost a 'Looney Tunes' aspect" to the "Calamity Song" video. He made the case that its spirit of "hilarious chaos" was exactly what was needed in a time that sometimes feels as uneasy as the one Wallace envisioned in "Infinite Jest."

"There’s this kind of resigned dark humor that people can hold onto," Mr. Meloy said. "It can be a moment of levity. Whether or not we are really moving into the end times, I think is hard to say, but at least we can have a sense of humor as we go down."

I don't have any real insight here. This tendency to turn everything sunny and rounded and safe seems like a noble impulse with horrible results. In other words, it is like liberalism from the conservative perspective. And still, I find the video almost irresistible. Who wouldn't want to live in the world of Infinite Jest as depicted in this video?

Well, so, I'm incoherent, but anyway I think the book and the video speak for themselves, so hopefully this post isn't wasted.

Texas Not Relying on Energy Jobs? I Douthat Very Much

2011-08-23T08:32:00.002-05:00

In his column arguing that Texas is a public policy success story, Douthat quotes a blog post by Matthias Shapiro: "[T]ake the energy sector completely out of the equation and Texas is still growing faster than any other state."

Shapiro's methodology is to look at the sectoral breakdown of employment numbers and find that the energy sector and related sectors account for "about 25% of the job increases in the last year."

Sigh. So imagine a small town in the middle of farm country. There are a few non-agricultural jobs - teachers, police, a generalist lawyer (wills, real estate, family law), maybe a family doctor, maybe a baker, a barber, grocer, whatever. Now a factory comes to town, employing 800 people. There is a boom in housing construction for the (roughly) 800 new residents. Non-farm employment soars - more barbers, more bakers, more teachers, more police, more everything. There could even be some professions in town that weren't there before. The total increase in employment is 2,000 jobs, but 1,200 of these are in sectors other than manufacturing.

Now there are rumors that the factory is leaving. The mayor is asked, "Aren't you worried about the employment situation if the factory leaves?"

"Only a little," the mayor replies. "When you look at factory employment in this town, it accounts for less than half of the new jobs. Even if the factory leaves, we will still have 1,200 jobs that we didn't have before. We'll be fine."

A prominent columnist concurs: "Nor are the jobs confined to the manufacturing sector."

The columnist quotes a blogger, who notes, "Take the manufacturing sector completely out of the equation, and the town is still growing faster than any other town in the state." The blogger uses the same methodology as Shapiro: he simply looks at the percentage of jobs in the town that are categorized as "manufacturing" or related sectors, and notes that the majority of jobs aren't even in the manufacturing sector.

So hopefully the error here is obvious. Each job in an export sector tends to support several jobs in non-export sectors such as services and local goods production. If the factory shut down, not only would 800 jobs be lost, but there wouldn't be a customer base to support most of the other 1,200 jobs that have been created in the town. Shapiro's methodology is laughably crude, because it doesn't take this into account at all.

For what it's worth, my understanding is that the aerospace industry in southern California was once estimated to have a multiplier in the 3 to 4 range - each job in that industry generated 3 to 4 jobs indirectly (I will try to find a more precise estimate and update this post). So as a back-of-the-envelope matter, Shapiro's numbers seem consistent with roughly all of the Texas employment "boom" stemming from the energy sector. And this wouldn't be surprising: the price of oil has fluctuated a lot, but oil remains very expensive by historical standards. I imagine the Norwegians are doing just as well as the Texans, if not better, despite the notable absence of Rick Perry or anything resembling his policy agenda.

(And indeed, Norway's unemployment rate was 3.6% in 2010, according to the CIA World Factbook. And 76% of its labor force is employed in "services," so we're not talking about an oil-based economy here, right, Douthat/Shapiro?)

Proposed Onion Headline

2011-08-16T20:56:00.000-05:00

Romney Vows to Get DC Man Fired, Take His House

This is My Moment - My Moment!

2011-08-16T16:35:00.004-05:00

Rick Perry has launched his campaign, along the way suggesting that if Ben Bernanke visits Texas, he might be treated to a little chin music. Official story here, Krugman reaction here, Yglesias post with video here. Here's my transcription of the video. Perry is responding to a question about the Federal Reserve - we don't hear the question:

Oh, the Federal Reserve. I'll take a pass on the Federal Reserve right at the moment, to be real honest with you, but I know there's a lot of talk and what-have-you about him. If this guy prints more money between now and the election, I don't know what y'all will do to him in Iowa, but we'd - we would treat him pretty ugly down in Texas. I mean, printing more money to play politics at this particular time in American history, is almost treacherous, uh, treasonous, in my opinion.

Okay, so. The macroeconomic theory implicit in Perry's response is of course asinine, reminiscent of Tim Pawlenty's infamous accusation that Obama has stealthily turned the dollar into a fiat currency. This is a good test of Perry's intelligence and/or character - if he were adequate in both categories, then he never would have said anything like this. And of course, when it comes to the violence, what the fuck?

But to me, the real test here is for Romney. Does he have the courage and skill to go on the attack? Can he turn this into a macaca moment? Here's how I envision it (slightly exaggerated to emphasize my point):

Yesterday Rick Perry made three shocking suggestions about the chairman of the Federal Reserve, Ben Bernanke. I won't spend much time on the first, since we all know that Rick Perry doesn't want to see any harm come to Chairman Bernanke. But the second suggestion, that Chairman Bernanke might goose the economy to get President Obama re-elected, is beyond the pale. If Rick Perry has any reason to doubt Chairman Bernanke's honor or his dedication to public service, he should say so. Otherwise he should keep his mouth shut. President Obama has plunged first the U.S., and now the world, into the deepest recession since the Great Depression. This is not Chairman Bernanke's fault, and I believe he has done his best to keep the economy afloat. His motivation is not partisan. He is just doing his best to create jobs. It's one thing to oppose Chairman Bernanke's monetary policy. A lot of reasonable people have reservations about some of the measures the Fed has taken during the Obama recession, and I count myself among them. But to impugn Chairman Bernanke's honor from the cheap seats, as Rick has done, is completely uncalled for.

But what I find really disturbing is Rick's suggestion that taking measures to improve the job market before November of 2012 would be treasonous. Now, I want to see Obama defeated in 2012 as much as anyone. In fact, I think we're not going to see real job creation in this country until businesses know that a market-friendly administration is on the way. But let me be clear: I wouldn't sacrifice one job, not one job, to improve my political chances. Americans don't need jobs in 2012, they need jobs right now. There's only one person I want to see lose his job, and it's the guy who's responsible for this whole mess: President Obama. Are you going to help me? Are you going to help me make him a [crowd joins in] ONE TERM PRESIDENT!

Okay, so, I'm no speechwriter. But I think Romney (not a spokesman) should say something along these lines, suitably toned down (but maintaining the Rick/Chairman Bernanke dichotomy, to belittle Perry and associate Romney with the institutional dignity of the Fed). He needs to show that he's not afraid of Perry, that Perry is a blowhard who doesn't understand the economy, that Perry is a bit of a crazy man who wants Texas thugs to beat the shit out of a nice Jewish boy from South Carolina.

Perry will probably learn not to say stupid things in public, other than when he's articulating the Republican agenda. Better for Romney if this inevitable moderation in tone makes Perry look more like a child who has been spanked by Romney than like a Texas conservative finding his footing on the national stage.

Hey, Hey, LBJ

2011-08-06T16:15:00.002-05:00

In my previous post, I argued that Matt Yglesias should know better than to criticize the press for asking process-oriented questions. As an example, I cited Marc Ambinder's prescient question about the debt ceiling, which was entirely procedural (it was all about leverage, not about a substantive issue). Sarang commented:

It's worthwhile to separate out two points. One (MY's point) is that it is bad for politicians and politics junkies to use these process issues to determine how elections will play out because they only affect outcomes indirectly through their influence on policy; to predict whether someone will get reelected the best thing to do is to predict the growth rate and stick it in the Hibbs model. This is largely true, but it runs into the other point, which is that everyone esp. Obama is in fact perceptions-driven and therefore to predict what policies they are likely to enact it is beside the point to ask what a rational person in their place would enact. MY's target audience is some mix of policy makers and pundits, so he is being descriptive on the first point and prescriptive on the second. This seems internally consistent.

So this reminds me a little of the argument that you should pay attention to technical analysis, not because it's anything other than chicken scratches, but because everyone is paying attention to those chicken scratches, so they move markets.

Today I dug up the Yglesias post I was thinking of but couldn't find. It spells out the point I am attacking a little more clearly. The title says it all: "Nobody Cares About the Press Corps' Process Questions."

So anyway I think Sarang and I are talking past each other. Sarang basically says, political maneuvers don't matter because elections are determined by macroeconomic factors, so you should pay attention to political maneuvers only inasmuch as politicians irrationally believe them to matter.

I think you should pay attention to political maneuvers because they are the means by which wars are launched, debts are defaulted on, and gays are barred from adopting children. Or to use a recent and ongoing example, Congress now uses pro forma sessions to prevent Obama from making recess appointments. Pay no attention, says Sarang. Obama's election will depend on macroeconomic aggregates.

I say pay attention: a huge number of executive branch positions remain vacant, and this matters. Maybe not as much as the 2012 presidential election, but enough that it is worthwhile for political reporters to note the issue. This is why I used the Ambinder example: if the safest financial asset in the world suddenly stopped making scheduled payments, it would be a very big deal, electoral impact or no. But since Ambinder's question was procedural, by Yglesias's stated logic (which I doubt he actually believes), it shouldn't have been asked in the first place. (One reason I doubt Yglesias thinks procedural questions are irrelevant is his longtime campaign against the filibuster, as well as posts like this, which addresses congressional hostage-taking - a classic procedural issue.)

So I stand by my point: paying attention to the accumulation and deployment of political power is a worthwhile endeavor.

A Significant Amount of Leverage Over the White House

2011-08-02T22:27:00.003-05:00

Everyone loves Jon Stewart's coverage of Marc Ambinder's infamous question on the debt ceiling, which he presciently asked on December 7, 2010 (a date which will live in...) (start around the 4-minute mark if you just want the part I'm talking about):

The Daily Show - Dealageddon! - A Heartbreaking Work of Staggering Compromise
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Okay, so. I made a good faith effort to track down an Yglesias post arguing that political journalists spend too much time on horse-race bullshit and not enough time on the issues voters care about. This is the best I could do:

The Beltway convention of focusing exclusively on process, horse race speculation, and “he said, she said” has long struck me as not just annoying, but slightly more inexplicable than it appears at first glance.

(It's annoying because I know there's a more apposite post out there, but I can't find it after a fairly extensive search.)

So anyway, Yglesias really ought to know better. Ambinder's question is exactly the kind of inside-baseball, non-substantive question that the public doesn't care about. But it should. I'm not going to defend political journalism in all its manifestations, but paying attention to the accumulation and deployment of political power is a worthwhile endeavor. And deep in his heart, Yglesias knows this.

Lifted from the Comments

2011-07-06T00:46:00.003-05:00

Sarang links to this old Yglesias post, one that I also find compelling. For now I'm just putting the link up here where everyone will see it (also it is hard to click through in the comment that Sarang left).

Progress and the PPF

2011-07-04T17:57:00.002-05:00

The production possibility frontier is an important concept in economics, but I would like to apply it a bit more broadly. First, a quick explanation.

The idea of the production possibility frontier is to chart a line showing the trade-off between two goods. For instance, imagine that a society must choose between defending itself (guns) and feeding itself (butter) (this is of course a classic example). One might put a point on the y axis describing the output of guns if the society puts every possible spare resource into gun production, and a point on the x axis describing the output of butter if the society puts every spare resource into butter production. Then one connects the points with some sort of line or curve, describing every combination of production of guns and butter that could potentially be achieved by the society (hence the name production possibility frontier).

So far so good. But a society may be operating within its frontier - that is, producing less of both guns and butter than it theoretically could. This may be because of bad social policy (too high a minimum wage, say).

Now, to extend this beyond economics, think of the two kinds of policy changes one might want to effectuate. One is a movement to the northwest or southeast - that is, trading away one good for another. Another is a movement to the northeast (or, I guess in theory, the southwest) - an improvement in the production of both goods.

And you can put almost anything on the axes. It could be redistribution vs. economic growth, or environmental protection vs. economic growth, or whatever. "Centrists" tend to search for policies that are "non-ideological" or "non-partisan" in that they eliminate waste and move us to the northeast (toward the frontier) (of course, one still has to choose whether to move more north or more east - ideology can never be eliminated entirely). "Partisans" deny that there are any "easy answers" and want to trade away one good for another (move to the southeast or northwest).

I don't have much more to say than this - I just think it's a useful framework for thinking about political issues. You should ask yourself, "Would it be feasible to move toward the frontier, or will any gains for my side come at the expense of the other?" But it's also important to remember that moving toward the frontier may be all but impossible (which effectively means that we are at the frontier, given what is under our control). This arises when some group can block any efficiency-enhancing measure that threatens its interests.

Further Thoughts on the Ideological Division of Labor

2011-07-04T17:09:00.004-05:00

Earlier I posed about the social division of labor and how different ideologies approach it. Already Sarang has posted a comment about cross-cutting preferences, noting that he is hostile to non-inclusive institutions. This is an important point. Part of conservatives' taste for family and church is that these institutions are much more tradition-bound and identity-based than the state. An important element of conservatism is its taste for glacial, Burkean change and its skepticism of deliberate, rapid change. One might go "meta" here and say that liberalism is preferable where the need for change is urgent and compelling (as in the civil rights movement), and that conservatism is preferable where there is much path-dependency and much to be lost by abandoning tradition (as in property rights vs. collectivism).

So there is the Burke point, and there is also the question of cosmopolitanism. Liberals tend to be universalist and to seek diversity and pluralism - these are values that are generally (but by no means always) promoted by a strong, centralized, interventionist state. Conservatives tend to have more taste/tolerance for nationalism and other forms of group-identification, and are baffled by the idea of diversity as a virtue. So as far as I know, conservatives have no real problem with redistribution that occurs within a church (everyone tithes, or whatever, and some of the money goes to feed the poor). Liberals think this is fine, but insufficient, because it excludes non-church-members and imposes various intrusive behavioral controls. To some extent it's a question of choose-your-coercion: would you rather be taxed, against your will (but subject to democratic controls), to provide a social safety net? Or would you rather be ostracized unless you attend church, donate money, obey religious strictures, etc.? (To some extent, libertarians need to confront the reality of these trade-offs, though of course they are entitled to propose alternatives, including a let-them-starve approach.)

So one might argue that the division-of-labor question really comes down to these motivational questions of discrimination, nationalism, religiosity, etc. In that case, one could imagine a realignment as society changes. A lot of people may find themselves on the conservative side once gay equality has been accomplished, for instance, because at that point there may not be any real danger of discrimination no matter what institution controls any given social function (except I guess churches?).

I'm not sure what to make of this overall - it's clearly correct on some level to say that the choice of institutions stems from preferences about tradition, nationalism, etc., but at any given moment it does seem useful to ask the division-of-labor question.

The Surplus(age) of Lawyers

2011-07-04T16:17:00.003-05:00

The first law school I was admitted to was Washington University in St. Louis, an excellent institution in a tastefully named building. When I visited, the dean gave a brief talk to prospective students. He argued that what is unique about the law is that it is concerned with justice, that lawyers are essentially creators of justice in the world.

I have more sympathy for this point now than I did then, but I still think it misses the mark. What is remarkable and valuable about law is that it is basically the way that our society allocates surplus. A well-functioning legal system provides clear, predictable allocation of wealth and thus facilitates markets and cooperation. This, in turn, facilitates the creation of "surplus" from exchange and from investments in technology, cultivation, etc.

What I think people often miss is the pervasiveness and the difficulty of the surplus-allocation question. Practically all social activity (defined broadly to include market interactions) creates, or seeks to create, some kind of surplus, and unless you have good mechanisms to allocate that surplus, much of it will be squandered in various forms of rent-seeking. By rent-seeking I mean activity that tends to redistribute wealth but not to create it, such as stealing.

The law is not strictly necessary (or even relevant) where people interact frequently, because non-legal social mechanisms control behavior (the central point made by Robert Ellickson's Order Without Law). But many interactions are anonymous or sporadic, and often there is enough at stake that the normal non-legal "punishment" (loss of access to the market) is not strong enough to control behavior. The law can also provide a framework (such as spectrum licensing) to create a market where none would likely emerge from decentralized behavior.

And even pedestrian law (all law is pedestrian law) plays an important role. Contracts, obviously, but also torts, wills, tax, bankruptcy, maritime law, etc. etc. Lawyers are engaged in the allocation of resources, whether before- or after-the-fact. Quite often it is sordid, and it is far from an exact science (the extent of both legal certainty and legal uncertainty is greatly exaggerated - if this makes any sense). But lawyers, great and small, have a vital role to play in building a good, prosperous society.

And this is notwithstanding that many lawyers are engaged in what is essentially rent-seeking. First, what is rent-seeking from the individual's perspective may be surplus-creating from the social perspective (as when a plaintiff sues a tortfeasor and puts the fear of God into other potential tortfeasors).

But there is such a thing as pure, indefensible rent-seeking by lawyers. This is the challenge of the legal system, to provide the benefit of the law in facilitating surplus-creation, while minimizing the cost of the law in the form of rent-seeking and diversion of resources (primarily the diversion of smart people into the law). It is emphatically not a waste to send smart people to do this job, but it is a shame when the law induces legal arms-races to no good end, and at great cost.

And this is what I think the deans of law schools should be telling law students. We are engaged in an ancient and noble profession, one that is fundamental to a good society. But the dark side of law is its potential for surplus-destroying, rent-seeking behavior. System-designers are responsible for the overall incentives in this regard, but any system will depend to some extent on being implemented by well-trained lawyers who understand the difference.

The Regulatory State

2011-07-04T15:18:00.002-05:00

I think that the reaction of Keynes to The Road to Serfdom, as recounted in Skidelsky's John Maynard Keynes: Fighting for Freedom 1937-1946, essentially captures the modern political dilemma, and it is particularly applicable to regulation (which is only a subset of government intervention). Recall that Hayek argued that when we intervene in decentralized, free-market decision-making, we are on a slippery slope, at the bottom of which is a dystopian statist nightmare. (As an aside, the failure of the western world to abolish government intervention or to plummet into serfdom is strong evidence of an angle of repose.)

Here is Keynes in response (I draw this from Skidelsky, who highlights the passage on p. 285 of Fighting for Freedom):

You admit . . . that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere, and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly under-estimate the practicability of the middle course. But as soon as you admit that the extreme is not possible . . . you are, on your own argument, done for, since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.

Skidelsky says that on this point, "it is game, set and match to Keynes." I am inclined to agree. Empirically, we know that governments can intervene fairly significantly in the economy without dooming their people to poverty, slavery, or whatever. (Though an ardent Hakeyian might argue that it is "too early to say," and that the US, Canada, Australia, and western Europe may yet collapse into a Soviet-style hell - or, alternatively, that we are living in such a hell and suffering from widespread false consciousness. On this account, for some reason we fail to appreciate that cap-and-trade is the moral equivalent of chattel slavery.)

And but so, having fairly convincingly refuted Hayek (at least as to his apocalyptic rhetoric), you can't stop there. Keynes goes on to write about the dangers of planning and the importance of having policymakers who are alert to those dangers.

And this is the thing about regulations. They have the following flaws (my list is not exhaustive):

1. Often they are simply misguided. And because they have the force of law, they can seriously distort markets.

2. They are prone to regulatory capture, in which the regulated entities "capture" the regulators (by hiring them, or because of frequent interaction, or by some kind of reverse Stockholm syndrome or something). Then the regulations are used as barriers to entry and are even used to preempt other legal controls that might be imposed.

3. Even when "successful" (i.e., well-intended and intelligently written), they cumulatively impose a serious cost on doing business that functions like a tax, but a tax that raises no revenue. Resources are devoted to understanding them and testing their limits. Arms races ensue.

4. The cost of regulation is increased by the fact that they must be rigorously (if carefully) enforced. This is because an infrequently-enforced regulation may be far worse than either a fully-enforced regulation or no regulation at all. In the first instance, selective enforcement means that some firms will be penalized and some won't, skewing competition. Perhaps more importantly, if enforcement can be avoided by strategic behavior, then firms will devote resources to avoidance instead of compliance (for instance, hiring lobbyists or disguising proscribed behavior). If enforcement is weak, then competition will sometimes favor evasion over compliance, actually driving honest firms out of business. The same dynamic is in play in the area of tax enforcement - if you "cut" taxes by gutting the IRS, then you raise less revenue, but you raise it in a "lumpy" way - some taxpayers pay the full rate, some pay nothing. Better to cut taxes across the board and make everyone pay. Greece appears to have fallen into a horrible equilibrium in this regard.

And so here is the synthesis:

1. Regulations are indispensable in modern life.

2. Regulation is problematic and very difficult to get right.

3. The only reasonable approach is to use some combination of restraint in imposing regulations and effort to recognize and address their known problems. The absence of regulation is not an option, and the indiscriminate use of regulation may be even worse.

So the real ideological battle should be about the former balance - regulatory design vs. regulatory forbearance (an argument in which conservatives have much to say that is valuable - and even when conservatives lose the argument, an appreciation of their critique can enhance regulatory design). Unfortunately, political rhetoric almost always seems to center on the second (untenable) choice between unbridled regulation and no regulation at all.

The Ideological Division of Labor

2011-07-04T14:05:00.002-05:00

Modern liberals and conservatives fundamentally disagree about the following things (there is a lot of overlap, and the first item basically subsumes the rest):

1. The "division of labor" among social institutions such as the state, the church, the family, the market, the courts, and labor unions.

Liberals favor the state, the courts, and labor unions. Traditional conservatives favor the church, the family, and the market (to some extent). Libertarians favor the market and the courts (though mostly inasmuch as the courts defend the market and guard against majoritarian intrusion on liberty).

None of these is a perfect social institution, and so a sort of "meta" approach is to try to achieve some kind of optimal allocation based on their relative strengths and weaknesses (but this is fundamentally a question about values - more on this later). "Fundamentalists" of various stripes tend to be blind to the shortcomings of their preferred institutions. An important strain of modern conservatism is its critique of the state, while an important strain of modern liberalism is its recognition of the extent to which well-functioning states and courts are necessary for markets to work.

2. The extent of redistribution.

I don't have much to say about this at the moment, but it is obviously an important (arguably the most important) area of disagreement. I have phrased it in a somewhat conservative-friendly way, in that the "re-" prefix implies that there is some kind of natural pre-existing distribution of resources that is disturbed or perverted by state action.

3. The extent of regulatory control of economic activity.

I will address this in my next post. The basic idea here is that regulation is absolutely necessary, and yet it is prone to serious flaws that can make the cure worse than the disease. Implementing an effective regulatory system is one of the biggest challenges of modern governance, and countries that are good at it will benefit tremendously.

Police Imitators

2011-05-28T13:53:00.006-05:00

This NY Times story about people imitating police officers is truly terrifying. It brings to mind the St. Valentine's Day Massacre and the blue light rapist (note, he was eventually captured and imprisoned). I wonder if modern technology might facilitate better identification of police officers so that it would be more difficult to fool people. As a legal issue, obviously control of police-identifying equipment (uniforms, badges, sirens, lights) could help in theory (they tried it in Arkansas), but in practice it's hard to imagine it working in a country like ours.

Another approach might be to make it legal for a woman who is pulled over to keep driving until she reaches a well-lit, public area (is this already the case?). So she would have to slow down and indicate her willingness to pull over, but she would not be penalized for waiting until she could safely stop. This would be more practical in urban areas than in remote areas, but then, in remote areas hopefully the police can afford to be more patient. And I suppose the policy could be extended to men as well, although I suspect this is the kind of thing in which women are usually the targets.

The trade-off, of course, is that if the driver is drunk or something, you want her to pull over immediately. Still, I think it would be best to make it difficult for police imitators along the lines I've suggested.

[Update: Apparently this is already legal (and there are other good suggestions in the post, such as calling 911 or driving to a police station). This should be better-publicized so that it is more difficult to victimize people.]

[Further update: Apparently the Chicago police department draws a distinction between being pulled over by an unmarked car and being pulled over by a painted police car. I can see why that is a sensible line to draw, but there may be times when it would be difficult to tell the difference, and of course criminals may even be able to get their hands on cars that look official (this is more plausible in rural areas, I would think, where there might be several overlapping jurisdictions - highway patrol, state cops, county sheriff, etc. - so that it's hard to tell if a marked car looks right).

So, long story short, my idea is far from original, and appears to be the policy in a lot of places. But I still think this should be better publicized.]

[Final update I promise: As the article mentions, imitating a police officer is a felony in Florida but a misdemeanor in many other jurisdictions. It seems to me that it should definitely be a felony in some circumstances - basically, if a guy pulls a woman over and then gets caught before he does anything else, that in itself should be treated as a serious crime. On the other hand, a guy who wears a police uniform to feel good about himself, or a guy who wears an NYPD t-shirt to get free drinks at a bar or something (not sure if that actually happens, but I think it commonly happened with FDNY t-shirts after 9-11) should probably be charged with only a misdemeanor, if anything (since anyone can get an NYPD t-shirt, that probably shouldn't be punished at all - although I could see imposing a fine because it creates confusion in the public mind about who is an officer).

Bottom line is that I want prosecutors to have the power to put these guys away for a long time if it appears that they are imitating police for insidious purposes.]

That Ineffable New Yorker Style

2011-05-19T20:07:00.003-05:00

Just want to make a note on the New Yorker style, or maybe a better way to put it is the New Yorker approach to profiles. It is a subtle and maddening approach, often implying far more than it is willing to say outright. It can also be brilliant in its evisceration of a subject, sometimes performed with such surgical skill that many readers don't notice the blood or the missing organs.

That's how I read this ostensibly glowing profile of James Dyson, inventor of the Dyson vacuum cleaner. In fact, the story does contain a lot of positive information about Dyson, and many people took it to be a puff piece (here is an example).

But I think all you really need to know about the piece's portrayal of Dyson is contained in these two passages:

Dyson describes his company: "'We don't have industrial designers. All our engineers are designers and all our designers are engineers. When you separate the two, you get the designers doing things for marketing purposes rather than functional reasons.'"

Marketing purposes rather than functional reasons! Imagine that. Later in the piece, we visit a Dyson testing facility and R&D lab:

"(According to a Dyson representative, American machines are louder than the European and Asian models, because Americans associate noise with power and don't trust a quiet machine.)"

Oh Dyson. Dyson Dyson Dyson. What the hell, man?

Note: It occurs to me, on reading the piece again, that the Dyson representative may have been speaking of competitors' vacuums, or machines generally. Sigh. Well, I think the better reading is that Dyson intentionally makes its American models louder for marketing, not functional, purposes. Of course the idea that marketing should be separate from design is famously contested in Malcolm Gladwell's profile of Ron Popeil.

Stop Reading Novels

2011-05-19T19:25:00.002-05:00

This post (linked from Marginal Revolution), which argues that people love long novels in part because of "Stockholm syndrome," brings to mind one of the most liberating moments of my life. A professor had recommended a bunch of books on urbanism, and I told him I was having a hard time with one of them, finding it dull and absorbed with trivia (I'm sure I phrased it more diplomatically). "Put it down," was his advice. "You have to learn not to finish a book."

This was liberating precisely because, while I didn't finish every book I started, I strongly felt that I should. I felt like a failure every time I gave up. It was a kind of literary puritanism.

Now, sometimes you have to finish a book whether you want to or not. And obviously, you are sometimes rewarded for sticking with a book. I read the first several pages of Anna Karenina and put it aside for years, bored by it. When I picked it up again, I devoured it, and now I consider it the best book I have ever read.

But! But! You absolutely have to learn when to set a book aside for good. If you don't like the first 100 pages of Infinite Jest, I don't think you're going to like the next 988 either.

It's a little like folding a hand in poker: you'll never know what would have been revealed. In the case of long novels, that can be tragic - you could be missing out on something amazing. But if you never fold a hand, you aren't playing poker right.

Peace Love Justice and No Mercy

2011-04-05T21:14:00.002-05:00

So I guess there has been some discussion about Alvin Roth and rationality and preference-satisfaction. I don't want to get too far into the weeds, but I wanted to chime in on behalf of preference-satisfaction.

A quick qualification: I have no qualifications. I am quite sure philosophers have thought pretty hard about this stuff, but I have not. I haven't even read the article I linked to.

I'm also not sure that people would actually defend what I (mistakenly?) take them to be saying - that preference satisfaction is neither here nor there, as it is neither necessary nor sufficient for a good policy outcome (the particular policy under discussion was the process by which medical students are "matched" to residency programs, a very complex problem).

But so this strikes me as deeply silly. I'm not going to try to defend preference-satisfaction on a philosophical level. Instead, I want to rebut some particular examples that have been put forward and make the case that it's silly to treat preference-satisfaction as a pointless goal.

What actually motivated me to write this post is that I think it's unfair to attack preference-satisfaction with examples in which preferences are not satisfied. So for instance, imagine that I prefer gasoline to whatever else I would spend $20 on, and the gas station proprietor prefers $20 to his gasoline. So if there's a free market in gasoline, maybe I buy the gas and burn it in my car. But uh oh, the emissions cause global warming and people suffer as a result! Say a guy loses his house. That seems like a bad outcome, the house probably meant a lot to him whereas I blew the gas cruising on the highway.

Is this a robust indictment of preference-satisfaction? Well, no - the guy didn't prefer to lose his house! What happened was that we satisfied some preferences but not others. There were unwilling participants whose preferences weren't given any weight.

The examples that people keep bringing up are of the destroy-the-house variety, so I don't really think they support the proposition for which they are cited. This is not to say that one couldn't adduce some good examples - addicts, people with shifting preferences, people with second-order preferences that don't align well with their first-order preferences, etc. I'm not ambitious enough to deal with these cases, but I think they can be regarded as limited. I, for one, am not moved by the possibility that medical students might have such poorly-defined preferences that they rank residency programs in a flawed way, much less one that could be rooted out and corrected with a sufficiently preference-ignoring policy.

And but so, where does that leave us? To me, preference-satisfaction seems like kind of thing that works well in practice but not in theory. If I give an example of a policy that satisfies some preferences and does not frustrate others, then in general that is a pretty good reason to adopt the policy. Maybe not if it involves addictive substances. But I mean, say I propose to plant a tree in my yard. I prefer my yard to have a tree in it. No one minds. We all understand that I should be allowed to plant the tree. Or at least, I think we do. I haven't heard an argument from the preference-frustration camp that would make me want to bar the planting of trees in these circumstances.

Taxi Policymakers Ask: What is Fare?

2011-03-22T22:20:00.002-05:00

Matty G had a post about taxi policy the other day, which reminded me that I had been meaning to blog about it. I am not sure why it fascinates me so much, but maybe this is the best way to put it: it is very important, very complicated, and very likely to confound your default ideological assumptions/approach. Maybe I'm exaggerating this last point, but I wonder how people would answer the following questions:

1. Should taxis be regulated in any manner? That is, should anyone be allowed to pick up fares, at any price, covering any area?

2. If taxis are to be regulated, should the regulations specify anything more than price/mile? Price + required coverage area? Insurance (beyond normal liability insurance)?

3. Should the number of taxis be limited, for instance by auctioning medallions?

4. What should the restrictions be on non-taxi car services - should they be allowed at all? Should they be allowed to pick up fares at negotiated, non-taxi (probably non-metered) prices?

5. Does it make sense to think of taxi service as a city-wide amenity that should be provided to outer boroughs (using cross-subsidization if necessary)?

6. If the answer to the previous questions is "it depends," then what does it depend on? What should taxi policy try to achieve? Should it be centrally planned or should it be treated more like other private enterprise (that is, facilitated by public policy but essentially decentralized)?

Then with those questions in mind, check out this article on the dearth of taxis during early rush hour, and this post on cab drivers refusing to take people to the outer boroughs, and this opinion piece on allowing non-taxi car services to pick up fares.

Taxi policy would make a great multi-disciplinary seminar at a law school or maybe even a liberal arts college.

Not the Idea of Bullshit but the Thing Itself

2011-02-24T22:06:00.003-06:00

My mind has been in turmoil since I made my last foray into the dark, vaguely alimentary passages of normative philosophy. [Is this a gay joke or a normative-philosophy-is-shit joke? -Ed. Why can't it be both?]

Here's the problem. Once you embrace rule utilitarianism, it seems as though you have abandoned consequentialism. And so it has become nearly impossible for me to draw a line between rule utilitarianism and other non-consequentialist normative philosophies. I mean, sure, the literal distinction is that those philosophies don't purport to maximize utility on average, though many of them may beat act utilitarianism when it comes to utility-maximization.

But so imagine that you are trying to use rule utilitarianism to convince someone to keep a promise when the consequences will be unobservable (and therefore will have no impact on future promise-making and -keeping). Try it! I, for one, almost immediately start invoking words like "fairness" and "duty" and "advantage-taking."

But it doesn't stop there. Rule utilitarianism must take into account the world inhabited by the moral actor. [Paul Newman? -Ed.] Lots of moral rules are utility-maximizing only if everyone else is doing them. Should you keep promises when no one else does? Or imagine a world in which everyone keeps promises made on the 5th day of each month, but otherwise cheats with abandon (it's kind of fun to imagine a world like that, actually - busy day for lawyers I think). You probably shouldn't take advantage by keeping only promises made on the 10th, even though a priori that would be just as good a moral rule.

And but so! Rule utilitarianism now has to deal with the interaction between ideal, a priori utility-maximizing rules and the real world. Whereas act utilitarianism merely has to take laws and social customs into account, rule utilitarianism has to re-run the whole simulation. And I'm pretty sure you get a coastline-length problem - you have to decide the scope of your analysis before you can ask meaningful questions about the ideal rules.

Luckily this can all be safely ignored because it is bullshit. Interesting to think about, though.

Brilliant Passages

2011-02-24T22:02:00.002-06:00

The first of an occasional series. From The Memory Chalet, by Tony Judt:

And yet New York remains a world city. It is not the great American city - that will always be Chicago.

This Post Can Make Your Life Happier Than Any Other On The Subway

2011-02-17T21:43:00.004-06:00

So Eileen told me about a paper by Rawls ("Two Concepts of Rules," The Philosophical Review, Vol. 64, No. 1, pp. 3-32, Jan. 1955) that I think has changed my view of rule utilitarianism. Caveat: I haven't read the paper, so I could easily be butchering the argument.

But here goes. "Act utilitarianism" is the belief that at each moment in time, each individual should do whatever produces the most expected utility going forward. "Rule utilitarianism" involves specifying a set of rules that, if followed, lead to maximum global utility. Then, in rule utilitarianism, the moral requirement is not necessarily to maximize utility in every instance, but to follow the utility-maximizing rules.

I used to think that rule utilitarianism was silly. Why? Because it seemed no different from sophisticated act utilitarianism. Of course you should keep your promises, even when a particular promise leads to unfortunate results, because the ability to make credible commitments is important. But an act utilitarian can seemingly take that into account, by asking, "What is the global effect of breaking this promise? Will it increase utility in the short term but, in the long term, contribute to the erosion of norms that are hugely beneficial? What is the likelihood that it will have that effect, and what is the size of the effect?" So then you balance the good and the bad. Not all promises should be kept, that's why we have personal bankruptcy. But keeping promises doesn't seem to require layering rules on top of utilitarianism.

But I was wrong - it is relatively easy to come up with models in which rule utilitarianism leads to more aggregate utility than even the most sophisticated act utilitarianism. The logic is very similar to the 2-box strategy in Newcomb's problem. Imagine that everyone gains a certain amount of utility from knowing that they live in a society in which innocent people are never tortured. And imagine that every once in a while there is a large utility boost from torturing an innocent person (perhaps you can extract the location of a hidden bomb by torturing a terrorist's innocent wife). Imagine that the police can, every once in a while, torture someone with literally 0% chance that anyone will find out beyond a small circle of people (the victim, the terrorist, a few police officers). And imagine that everyone in this society is both rational and a principled utilitarian (the terrorist just has radically different factual beliefs about how to maximize utility). And finally, everyone knows that the police can torture people secretly, but the public can never discover whether it has happened in a particular case.

Okay, so, if the math works out right, then sometimes the police will torture the innocent victim if they are act utilitarians, but not if they are rule utilitarians, and the world in which they are rule utilitarians (perhaps a world in which everyone is a rule utilitarian) is a world of greater aggregate utility than the world in which they are act utilitarians. This is because the torture is secret - the only way people will know that it doesn't happen is if they know the police officers are rule utilitarians. If the police offers are act utilitarians, then everyone will assume that the torture happens, because everyone knows that it will be utility-maximizing in some particular instances.

It's like taking the second box in Newcomb's problem. You might as well - it can only increase your winnings. What you ideally want is to be the kind of person who only takes one box, but you never actually want to take only one box. Your decision to take two boxes doesn't affect the amount of money in the box (your decision itself, as opposed to your tendencies, was unobservable to the person who arranged the boxes). Similarly, if you're an act utilitarian police officer, you go ahead and perform torture (if you believe it will increase utility) because your actions don't affect people's beliefs (your decision itself, as opposed to your moral belief system, is unobservable to the public). What you want is to be the kind of person (a rule utilitarian) who doesn't torture anyone.

Okay, so, I think that makes sense. And although this is a somewhat exotic hypothetical, it's not hard to imagine that lots of decisions are effectively unobservable to the public. We make plenty of promises that are unverifiable by the general public, or even by specialized institutions like credit bureaus. And yet the tendency to keep those promises is hugely valuable, even if in particular cases (1) the debtor gets more utility from the money than the creditor, and (2) the promise is unverifiable, so there is no (net) utility to be gained by keeping it.

So now I think rule utilitarianism is almost self-evidently better than act utilitarianism, though before tonight I thought the exact opposite (to be precise, I thought rule utilitarianism was incoherent or a mere refinement of act utilitarianism). So, philosophy works! I think! (Haven't actually read the paper.) Too bad normativity is dead.

All Changed, Changed Utterly

2011-01-01T12:25:00.002-06:00

I just bought some eggs, and as I tried to choose among the different varieties (farm fresh! cage-free! free-range!), it occurred to me that this really is an area in which modern technology could provide some useful innovation. Instead of making vague, hard-to-assess claims about the treatment of the hens, egg producers could simply include a bar code sticker on each carton. The customer could take a picture with a smart phone, and then a picture of the actual hens, in their actual living conditions, could pop up on the screen. I don't mean a generic, never-changing picture of the farm - I mean some kind of automated picture that is updated daily (or whatever), from a fixed location, showing where the hens actually are.

Now, obviously appearances can be deceptive, and you would have to make sure that the egg producers are being honest with their photography. You would also want to include information beyond the bare pictures. And ironically it might be the most difficult for true free-range hens to be photographed (but if that's the case, you could take a shot of the nest where the eggs are laid to show its surroundings). But this kind of thing, which would once have been prohibitively expensive, should involve a large up-front cost and then modest ongoing expenses. It's all digital. People are definitely willing to pay a premium for humanely produced eggs, and people definitely can't trust the current labeling system, so it seems to me that this would provide a real benefit.

Forgetting New Ice

2010-12-30T13:39:00.004-06:00

So according to a recent NYTimes piece, New York City has a 23-year, $1.5 billion contract with an entity called Sims Municipal Recycling of New York L.L.C. Among other things, the company recyles appliances that are picked up from the curb by the Department of Sanitation. I saw this article because Gregg Easterbrook linked to it and commented on the fact that thieves have been stealing appliances from the curb:

This issue is not the cleanliness of streets or the environmental benefits of recycling -- it's control of money. The New York City Sanitation Department pays a company called Sims Municipal Recycling about $65 million annually to pick up and recycle metal, glass and aluminum. Notice what's happening here? Recycling is supposed to make economic sense. If it did, the recycling company would be paying the city. Instead, the city is paying the company.

. . .

Notice what else is happening here -- New York City pays a company millions of dollars to do something "thieves" will do for free. The "thieves" harm no one, and could save New York City taxpayers considerable money. But then bureaucrats wouldn't be in control. And surely no-show jobs and kickbacks have nothing, absolutely nothing, to do with New York City sanitation contracts.

So, first of all, it does not appear that Sims picks up the appliances. The Department of Sanitation does that.

But much more importantly, the assumption that this could all be handled by the market, instead of those nasty bureaucrats, is wildly implausible. The key thing to recognize is that this is not merely a market for recyclable materials. It is a hybrid of a market and a government service (responsible, reliable disposal of waste material). If you focus on only one aspect of the service, you will go badly astray. For one thing, the NYTimes article clearly states that, per EPA requirements, city employees first drain CFCs (ozone-depleting chemicals) from appliances and then haul them to the recycling facility. I have a hunch that appliance thieves only do this some of the time - maybe never.

Another thing the appliance thieves don't do is haul away every appliance that is left on the curb. The thieves almost certainly cherry-pick the appliances that are most valuable to recycle and leave the remaining appliances to be handled by the dread bureaucrats. But New Yorkers presumably want all appliances removed, and are thus unwilling to rely on the tender mercies of the free market.

I have no idea what the contract with Sims provides, but I'm guessing that Sims doesn't get to pick and choose which appliances to recycle. The city produces a stream of recyclable trash, some of which is valuable and some of which isn't. Assuming the city is halfway decent at negotiating contracts, it saves money by providing the entire stream to a recycling company, which has to take the good and the bad. If you let individuals take all of the valuable items, then your stream of trash is worth less, and the city's recycling contract will get more expensive.

So I think Easterbrook is making far too much of the purported market evidence - of course entrepreneurs are happy to take the profitable segment of the market, as long as they don't have to take on any of the CFC disposal obligations or provide a service when it isn't profitable to do so. But beyond a strange, blind affection for markets, I think another problem here is the failure to recognize the complexity of market structure on the borderline between government services/utilities and market products and services. Sometimes a monopoly is essential as a way of cross-subsidizing a particular activity, and if you're going to rely on that mechanism, then you have to guard the monopoly against entrants who seek to pick off the profitable bits. This is one of the lessons of New State Ice Co. v. Liebmann (in which Brandeis issued a famous dissent, including the classic line: "It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.").

So, let's not fire those bureaucrats just yet. For less than $10/citizen/year,* they allow New Yorkers to dispose of their appliances in a convenient, environmentally responsible way. I'm sure the system doesn't work perfectly, but it is far from the worst-functioning aspect of NYC government. And the entrepreneurs are making it worse, not better.

* EDIT: that's the cost of the Sims contract, presumably the overall system costs more.

Camerone: Keeping Priorities Straight

2010-05-03T01:16:00.003-05:00

Once the airstrip became unusable, the French relied on airdrops for their supplies. A lot of the supplies ended up falling behind enemy lines, and other supplies fell into the no-man's-land between the French and the Viet Minh positions. On April 30, the day on which the French Foreign Legion celebrates Camerone, some supplies had fallen into no-man's-land. From page 347:

One such situation that day was to have humorous side effects. At 2200, de Castries' headquarters reported to Hanoi a successful raid on the Communist trenches and fortifications south of E2 by Maj. Coutant's 1/13 Foreign Legion. One Viet-Minh blockhouse was completely destroyed with plastic charges and two others were severely damaged. In addition at least ten enemy soldiers were killed and others were wounded, while there were no friendly losses to report. The communique, however, failed to stress that the idea of the raid originated in the fact that two complete crates of "Vinogel" wine concentrate had fallen into no man's land east of the Eliane ridgeline held by the Legionnaires. The Legionnaires, who thus far that day had had to celebrate Camerone with exactly one bottle of wine per platoon, were not about to let that precious booty fall into enemy hands. A commando of volunteers was organized (as one non-Legionnaire observed: everybody would have volunteered for that raid) and as soon as night fell pushed off into no man's land. The main objective was rapidly secured, the knocking out of the enemy bunkers being a mere tactical necessity incident to the success of the operation.

German Legionnaires Sing a Song

2010-05-03T00:45:00.002-05:00

The Viet Minh captured lots of French troops and made psychological efforts to sow doubt and disloyalty among them. This was ultimately successful in the case of some of the soldiers from Algeria, who later fought against the French in that country. This passage concerns Germans serving in the French Foreign Legion. From page 435 of Hell in a Very Small Place:

[Major de Mecquenem] particularly remembered in his camp a group of Foreign Legionnaires of German extraction who had decided, correctly enough, that this was not their war anyway and that what now counted most was to stay alive until the conclusion of the cease-fire. They informed the camp commander that they had turned "progressive" and were immediately given a preferred status within the camp, along with improved food rations. Every morning part of the ceremonial consisted in a lecture by the camp's political commissar on the previous day's victories in the Battle of Dien Bien Phu, and it became the role of the "progressives" to provide a suitable cheering section for the announcement of such victories. They cheered or gustily sang the Internationale for the defeats of the 3rd BT on Anne-Marie and of the Algerians on the Dominiques. They also had no objections to applauding the destruction of the Moroccans and Vietnamese paratroopers on Eliane 1.

But then came the bitter battles of mid-April for the Northern Huguettes. One morning the Viet-Minh camp commander read the rousing news that the Foreign Legion infantrymen and paratroopers who had held the Northern Huguettes had been overwhelmed and that part of the vital airstrip was now in the hands of the People's Army. There was a dead silence among the assembled prisoners and, in contrast to established habit, the cheering section of the "progressives" also had remained silent. In an annoyed voice, the camp commander turned to them and said: "Come on, sing! What are you waiting for?"

The Foreign Legionnaires looked at each other in silence and then began to sing. There was an instant gasp of shock among the assembled French prisoners - until they recognized the German song: "Ich hatt' einen Kameraden, Einen bess'ren findst du nicht . . ." ["I once had a comrade / you couldn't find a better one . . ."] The turncoat Legionnaires were singing the beautiful song with which Germans have honored their war dead since the Napoleonic wars of 1809. It was one thing to cheer at the demise of the other "strange" units fighting in the valley; it was another to betray the Foreign Legion. The "progressives" were stripped of their special privileges and returned to the rice-and-water diet of the other prisoners.

Vietnamese Paratroopers Sing a Song

2010-05-02T23:40:00.003-05:00

For my first post from Hell in a Very Small Place, one of my favorite scenes from the book. The French have lost Eliane 1 (E1), a strongpoint at Dien Bien Phu. They are mounting a counter-attack to retake the hill. The passage is from page 235:

Then something very strange happened. Something which, in the recollection of the thousands of men who heard it that night, had rarely happened before in Indochina. As the hundred Legionnaires and French paratroopers stormed across the low saddle between E4 and E1, they began to sing. Some of the French paratroop songs are in fact translations of German paratroop songs, and now, as they stormed forward, the German Legionnaires were singing in their grave Teutonic accents while the French were singing in their own language. For a moment there seemed to be a brief lull in the battle - even the enemy seemed to attempt to identify the strange new sound. But the song and singers melted away in the firefight atop Eliane 1 and Bigeard decided to throw in the last available ready reserves: 2nd and 3rd Companies, 5th Vietnamese Paratroops. This was the same battalion that had covered itself with shame at the ford of Ban Ke Phai on March 15. Purged of their unreliable elements, and reinforced by some of the French cadre left over from the disintegrated T'ai battalions, they had given a good account of themselves in the previous battles for Huguette and the Five Hills. Yet somehow they had never again been taken seriously. Now their turn had come to be offered up for sacrifice on Eliane 1. Unflinchingly, the little Vietnamese paratroopers and their French cadres began the climb, and they, too, sang. In 1954, the Vietnamese Army was still a young army. It had flags of its own and a national anthem. But so far, no one had yet found the time to provide that army with a rousing marching song that could be shouted at the top of one's lungs if only to drown out one's fright. But there was one song which was then still in the cultural inventory of every Vietnamese schoolboy, and that was the French national anthem, the Marsellaise. As the Vietnamese paratroopers in turn emerged on the fire-beaten saddle between the hills there suddenly arose, for the first and last time in the Indochina War, the Marsellaise. It was sung the way it had been written to be sung in the days of the French Revolution, as a battle hymn of the French Republic. It was sung that night on the blood-stained slopes of Hill Eliane 1 by Vietnamese fighting other Vietnamese in the last battle France fought as an Asian power.

Hell in a Very Small Blog

2010-05-02T23:16:00.002-05:00

So a while ago I read Hell in a Very Small Place, by Bernard Fall. Fall was a French journalist and academic who spent several years in Vietnam (ultimately dying there in 1967 after stepping on a landmine). Hell is the story of the battle of Dien Bien Phu. Dien Bien Phu literally means "seat of the border county prefecture." It was a sleepy town in a remote valley until the French chose to locate a military base there, complete with airstrip, in 1953. The Vietnamese Communists (the Viet Minh), under the military leadership of Vo Nguyen Giap (still kicking at the age of 98), decided to concentrate their forces on Dien Bien Phu. It was a major logistical effort, and in a sense it was exactly what the French wanted. The Viet Minh didn't engage in guerilla tactics. They brought in artillery, anti-aircraft guns, and a large conventional army. This was supposed to be the kind of fight the French were bound to win.

But as it turned out, the French were ill-supplied and out-gunned. Once the Viet Minh had their guns trained on the airstrip, it became impossible to supply the French base except by airdrop. The Viet Minh tightened the noose and brought in more anti-aircraft, and more and more of the supplies (including ammunition) started dropping into Viet Minh hands. The base was overrun on May 7, 1954, and the surviving French troops were marched to prison camps. It was a major humiliation and basically the end of the French military presence in Vietnam.

Over the next week I'll post particularly gripping passages from Hell. The book is hard to recommend because it is 466 pages of military history, but it contains more than its share of human drama. I hope I can capture some of that on my blog by literally copying it word for word.

A few minor notes: I will try to refer to the Vietnamese Communists as "Viet Minh" rather than "Vietnamese." There were plenty of Vietnamese who fought for the French, and as we shall see, some of them were exceptionally brave. Although I will refer to all soldiers fighting for the French as "French," many were not French at all. Some were in the French Foreign Legion, some were soldiers from French colonies like Morocco and Algeria. Others, of course, were Vietnamese. Still others were tribesmen from Vietnam who were not ethnically Vietnamese.

But I hope to keep my commentary light and let Fall's book speak for itself.

Stoats on Camp

2010-04-23T12:01:00.002-05:00

As an introduction to the concept of camp, I wonder if you could do better than a somewhat-recent New Yorker piece on a Yale recruitment video. Here's the passage that got me thinking:

Reaction to the video on the Broadway circuit has ranged from "giddy delight to mortification," [Doug] Wright [class of '85] said, noting that "tonally, it was a little unclear whether it wanted to be true camp or if it had a dollop of sincerity."

This opposition rings false to me, because sincerity is not inconsistent with camp (though for what it's worth, the Yalies claim to have been aiming for a campy effect).

But then the New Yorker piece itself descends (ascends?) into what seems like camp to me. Lewis Lapham '56 (a former Harper's editor) faults the video "not for its failed attempt at Sontagian camp," but for its elitism:

"I’m surprised they didn’t dress the girls as shepherdesses. In the ancien régime, this is the kind of thing that would have prompted the French Revolution. Are we supposed to send this to struggling youths in Asia and Africa?"

And I love this quote from Dick Cavett:

"I wonder if it really was made in America, because there are no fatties."

New Band Name

2010-04-15T02:19:00.003-05:00

"The message from scientists at this point couldn't be clearer: the world's emissions trajectory is extremely dangerous. Goofball weathermen, Climategate, conspiracy theories - these are all a distraction from what's really happening. Which, apparently, is what we're looking for."

-Elizabeth Kolbert, Talk of the Town

I'm changing my band name to Dangerous Emissions Trajectory.

What Is To Be Done

2010-01-19T20:26:00.002-06:00

So it looks as though it's bad news out of Massachusetts. I think Democrats are going to have a tough time in the next few years for macroeconomic reasons, and that's just kind of shitty, especially since the Democrats are the party of responsible economic policy.

But taking a step back, I actually think a few substantively minor changes could improve politics a lot. Here's one idea I've been mulling over. The state legislature would set taxes at (x+y)%, where x is determined by statute and y is determined by a bureaucracy (but bound within some range). So the tax can be as progressive or regressive as you like, but the absolute level is determined by unelected officials. Those unelected officials would be given a simple mandate: balance the budget.

This would achieve two things. First, no elected politician would ever have to raise taxes (except in extreme circumstances). Fiscal responsibility would be baked in, and it would be fairly transparent.

Now, it might seem that this favors Democrats, in that it would be essentially impossible to campaign on lower taxes (the legislature could lower x, but this would just increase y by the same amount absent spending cuts). But actually I think this would just force the public to acknowledge the simple fact that cutting taxes without cutting spending defers or shifts taxes rather than truly cutting them. A GOP candidate could do just fine if he could actually point to spending cuts that would in turn allow a lower y.

The net effect should be a more responsible legislature and a more honest public debate over the appropriate level of taxes and expenditures.

You can extend the idea to the federal government, except that I would hire an economically sophisticated bureaucracy and empower it to run deficits under specified conditions (unemployment above a certain level, interest rates below a certain level, etc.).

Newspaper Known for Fucking Up Headlines Ridiculous

2010-01-12T17:21:00.002-06:00

"Mexican Known for Stewing Victims Arrested"

Sigh.

Gruesome story, too.

Kling Earns a Grain of Salt

2009-12-16T12:41:00.007-06:00

Arnold Kling has written (at least) two posts in the last two days that I think are wrong.

1. Bank Regulation is a Political Economy Problem

I have emailed my critique of this post to Grobstein, so some of this is taken from that email.

Some background is necessary to understand Kling's point. The animating concept is the moral hazard created by government guarantees. Say the government guarantees that some class of investors will be repaid in full (or will be "bailed out") if a firm becomes insolvent. This will make it relatively easy for that firm to raise capital from that type of investor, and the normal constraints on the firm's risk-taking will be reduced (the investors will not monitor/control the firm as carefully, since the government will bear some of the risk of loss). The firm may even actively seek superoptimal risk (again, because the juiced up returns accrue to the investors, but some or all of the risk belongs to taxpayers). So we would expect government guarantees to result in excessive risk-taking and transfers from taxpayers to investors.

The classic example of a government guarantee is deposit insurance. In brief, our approach to deposit insurance is this: depositors get a very solid guarantee that the principal value of their deposits is secure, up to a limit (currently $250,000 per depositor per insured bank). This means that banks have access to fairly cheap short-term financing (very short-term in the case of checking accounts, a bit longer-term in the case of certificates of deposit) and are much less likely to suffer bank runs than previously in U.S. history (and elsewhere currently).

The deposit insurance does create a moral hazard problem, so banks are regulated and are required to pay premiums. When banks still manage to become insolvent, the FDIC steps in, seizes the bank's assets, pays off its depositors in full (up to the per-depositor limit), and gives any residual money to its other creditors (I'm a little hazy on how this last part plays out, but I don't think it matters for our purposes). This is called the FDIC's resolution authority, and it is actually quite ruthless about exercising it (arguably too ruthless).

Deposit insurance is not the only government guarantee that might give rise to moral hazard problems. Economists also worry about the implicit (imputed, not legally enforceable) guarantee of investments in institutions that are "too big to fail." What we mean by "too big to fail" is that an institution is so systemically important that its failure would cause substantial economic damage (this is a fuzzy concept that has been much debated lately). Whatever else this means, it means that when the institution looks shaky, the government has no real option but to step in and save it (bailing it out in one of a variety of ways).

It is puzzling that Kling focuses on deposit insurance. This is odd because the FDIC already has resolution authority and is shutting down banks right and left. True, one might doubt whether the FDIC would shut down Citi or Bank of America (or the relevant portions of them), but this is a subset of the "too big to fail" set of institutions, which only partially overlaps the "FDIC regulated" set of institutions. To the extent the FDIC fears to shut them down (something that has not been adequately demonstrated, I believe), those fears would apply all the more to a governmental entity with less clear-cut authority to act.

Where Kling really goes off the tracks, though, is his insistence that "it is absurd to suppose that you will exercise 'resolution authority' to close a big bank during a crisis and at the same time say that it is unthinkable to break up big banks now."

This is wrong for all kinds of reasons. First, it is unclear under what authority the government could break up the big banks now. Any legislation would seem ad hoc and unprincipled (though it would probably be worth enacting). Resolution authority, on the other hand, would apply only to insolvent institutions (or institutions on the verge of insolvency). Any bank that wants to avoid government seizure could take the prudent step of remaining solvent. Banks that fail to do so are unlikely to garner much public sympathy.

More importantly, resolution authority seeks to provide the government with a credible threat in case banks do decide to play chicken. In the status quo, the government has very little alternative - the aftermath of Lehman's collapse was simply too horrible to risk again. With resolution authority, the government can credibly tell shaky banks to sell themselves quickly, at any price they can get, or the government will exercise its duly granted powers and take the reins.

The remaining question is how effectively the resolution authority would curb moral hazard. Obviously you would want to wipe the shareholders out, but is this sufficient? Should certain classes of creditors also be expected to take a haircut? These are interesting questions, but Kling doesn't address them, because as far as he is concerned, it is less politically feasible to grant resolution authority to a government agency than it is to split up seemingly healthy banks.

2. The Job Assignment Problem

Kling's argument here is:

"The Recalculation Story is simply that the job assignment problem has become too difficult for the market to solve quickly, using its tools of price signals and incentives. Government could step in and assign lots of jobs to lots of people, but that would probably come at a loss of the productivity growth that really ought to be our focus."

Really this comes down to my rejection of the "Austrian" or "real business cycle" theory of mass unemployment (which I think of as an application of the economic calculation problem). The idea is that it is very difficult to assign jobs to all members of society in an optimal (or close-to-optimal) way. So what you get is a period of time in which these things need to be sorted out, and in the meantime you have lots of unemployed people. But it's very important not to give those people aid in the meantime (and certainly you shouldn't give them jobs), or you will retard/skew the market's allocation of talent.

One quick observation is that, as often seems to happen, while defending the market Kling has written a fairly scathing indictment of it. Unemployment (not seasonally adjusted) stood at 7.1% in December of 2008 and has been above 8% ever since (currently it is over 9%) - and Kling remains "doubtful that the solution will arrive quickly." The market is taking its sweet time, apparently.

But the more important thing to note here is how crazy the underlying theory is. After all, why did the recalculation problem become so severe in late 2008? Was it so much simpler back in 2006 and 2007? Have we broken through some kind of complexity threshold that compels ~10% permanent unemployment? To put it another way, why did things suddenly get worse, and why should we expect them to get better?

I believe that Keynsians have a fairly good answer to these questions. They would argue (apologies for oversimplification and likely errors, it's been a while): this isn't a "recalculation" problem, it's an "inadequate aggregate demand" problem. If structural adjustments caused frictional unemployment, then we should have high unemployment during both booms and busts (a point made by Paul Krugman and Tyler Cowen. Aid to the unemployed and jobs programs are likely to be helpful because they increase aggregate demand, avoiding the waste of resources that results from unemployment (and, importantly, providing income to people who might otherwise suffer greatly).

Kling cautions against viewing high unemployment in "conventional Keynesian terms, where we all work in the GDP factory making GDP units." But this hardly disposes of the cogent critique presented by Krugman and Cowen. I would like to see Kling address the glaring problems with his theory. The evidence for Keynesianism seems very strong to me. A tremendous amount is at stake - are we really supposed to allow unemployment benefits to expire, cut the minimum wage, and call a halt to stimulus spending based on a "recalculation story" that doesn't seem to be coherent?

More Wrong

2009-11-12T23:29:00.004-06:00

So I innocently clicked through from Grobstein's blog to this happy horseshit. I decided to give it a try - I think I'm fairly good at assessing my own likelihood of being right about things.

I took quiz 1. It says that, of the answers in which I was 96% confident, I got 12/13 (or ~92%) correct. Uh oh, looks like I'm not so well-calibrated after all!

Well I'm calling bullshit. Here are my 96% answers:

1. Who was the first woman to sit on The United States Supreme Court?

I said Sandra Day O'Connor.

2. What is the modern name of the city once known as Constantinople?

Istanbul. Istanbul was Constantinople, now it's Istanbul, not Constantinople, why did Constantinople get the works?

3. Which of these companies has the most U.S. commercial outlets?

The options were Macy's, Radio Shack, McDonald's, and Toys R Us. I said McDonald's.

I note that this is a stupid question because the correct answer could change. However, the internet tells me that Macy's has about 810 stores, Radio Shack has 6,757 stores, McDonald's has 12,804 restaurants in the US, and Toys R Us has 860 stores in the US.

Anyway I got it right.

4. Who was the only American president actually impeached by Congress?

I put Andrew Johnson. And I'm fucking right.

5. U.S. Marines fought in Peking in 1900 what military campaign?

I put Boxer Rebellion.

6. Sherlock Holmes was a fictional detective created by...?

I put Arthur Conan Doyle.

7. Who built and flew "The Spruce Goose"?

Howard Hughes.

8. What was the name of the woman who died at Chappaquiddick?

Mary Jo Kopechne.

9. Who is believed to have built the hanging gardens of Babylon?

Nebuchadnezzar.

10. What country began the digging of the Panama Canal in 1882?

France.

11. In Roman mythology, who was the blacksmith of the gods?

Vulcan.

12. How did The Lusitania sink?

Torpedoed.

13. What was Paul Revere's occupation?

Silversmith.

So basically, I was 13/13. Now, one could quibble about some of these. For instance, the Lusitania was in fact torpedoed, but arguably the real reason it sank was that it caught fire, and it was a mere coincidence that it was torpedoed immediately beforehand. Or, you know, maybe some people believe King Tut built the Hanging Gardens, in which case King Tut would be a correct answer, notwithstanding that Nebuchadnezzar actually built them.

But going back and trying out alternative answers, I discover that it was the McDonald's question that tripped me up. I'm picturing him designing the quiz, chortling as he sets up a trick question based on the fact that McDonald's has restaurants, not outlets (or that they are franchises or something).

Basically, the lesson is, these Less Wrong people are fuckos, and you have no reason to trust anything they write about anything until you have independently verified it.

[UPDATE: According to quiz 2, Buenos Aires is bigger than Rio de Janeiro. Now, in some sense this may be true, but why would you write a question with multiple correct answers?]

How We Got Where We Are

2009-09-07T00:19:00.002-05:00

Random thought: standardized test scores are like FICO scores. Meaningful, but with serious limitations that are routinely ignored.

Which I think makes me an alt-A borrower with a zero-down, high LTV option-ARM. Thanks, America!

Circulation

2009-09-06T23:37:00.002-05:00

So it occurs to me that no one ever properly explained the circulatory system to me. I always pictured it as a sort of pipe weaving its way through the body, with blood rushing through it thanks to the heart. Each blood cell would make a complete circuit of the body.

But that can't be right. It must be two series of tubes, one high-pressure and one low-pressure. The blood is forced across tissue by the difference in pressure. The heart pumps blood from the low-pressure system to the high-pressure system to maintain the differential. Each blood cell crosses over at some point and then immediately returns to the heart - so for instance, it might go from the high-pressure system to the low-pressure system somewhere in the leg, and immediately return to the heart.

Now it strikes me that the lungs must be set up to intercept each blood cell either before or after it goes through the heart, because of course one of the main points is to carry oxygen throughout the body.

Anyway, it's a testament to my pretty devastating lack of intelligence that I never learned how circulation works. That's, like, second grade, right?

Education and Charity

2009-09-06T23:17:00.004-05:00

So in the comments to my previous post, Pillar of the Stoat asks for a charitable version of the Robin Hanson post I mocked to Grobstein's chagrin.

I can't do it for medicine - I just don't see how one can see medicine (with the possible exception of cosmetic surgery) as wasteful signaling - but I can do it for education.

The basic idea here is that you don't really learn that much in college. And, especially, you don't learn that much more at a place like Amherst College than you do at the University of Massachusetts. The difference is that an Amherst kid has been approved by the Amherst College admissions department, and the UMass kid (probably) has not. So even if you get into both schools, and even if you will learn substantially the same amount at either institution, you might be better off at Amherst College simply because the degree signals to the world that you were elite enough (in whatever way) to get admitted to Amherst College.

So then there's some kind of complex game where:

1. Schools compete for top students with financial aid, good facilities, good faculty, etc. A lot of this stuff is a waste of money in that it doesn't contribute to educational outcomes and it isn't priced in the market - it's a windfall to elite students.

2. Students compete to get into elite schools, defined as schools that can afford to be especially selective about admissions.

3. Alumni/ae contribute financially so as to maintain the value of their degree and to give their children a boost in admissions.

All of this involves huge diversion of resources to what is essentially bullshit, given that you could achieve the same quality of education for much, much less money. It's all individually rational and socially wasteful. Which is quite an indictment of the free market, by the way, but let's not think dark thoughts tonight.

And of course, given the existence of financial aid, community college, etc., anyone who doesn't get a higher education is automatically suspect. We could very well be in a bad equilibrium in which everyone is required to at least try to get a college education, however ill-suited he/she is.

There is a counter-argument, along the lines that college is hugely valuable for the elite and not horribly costly for everyone else, that as society grows richer we should devote more resources to not-strictly-cost-justified pursuits like widespread higher education, that colleges are valuable centers for subsidization of research and other academic pursuits, etc. I don't really buy it, but it's certainly a respectable argument.

Anyway this should give us pause about the non-profit status (and thus implicit government subsidy) of elite colleges.

Well, All Right Then

2009-09-04T21:49:00.004-05:00

So I guess Robin Hanson is a male. And it turns out that this scathing critic of wasting society's resources on medicine is a believer in cryogenics (link courtesy of Wikipedia). The mind boggles.

An Arms Race for Not-Being-On-Dialysis

2009-09-04T21:07:00.002-05:00

So my blog muse strikes again, linking to this insane post by Robin Hanson. I may write a sober refutation at some point, but I don't think the post deserves one. I will instead focus on a particular claim, one that I think is not incidental but rather indicative of Hanson's overall ridiculousness and unseriousness. Sarang used the term "unhinged" to describe a right-wing assertion the other day, and the word seems to fit this one perfectly.

The gist is that Hanson is upset that a wealthy entrepreneur gave money to charity, thus "pissing it away." Hanson illuminates his (her?) point by noting that the entrepreneur (Alex Grass) apparently donated money to a hospital. This constitutes pissing money away because medicine is mainly a wasteful signal - we already have too much of it.

Hanson doesn't actually specify which medical procedures or products constitute wasteful signaling, but I think we all know some of the big culprits. Number one on my list would be the antibiotics that transplant recipients take because their immune systems are compromised. Why are their immune systems compromised, you ask? Get this - they actually take drugs called immunosuppressants, which are exactly what they sound like. You read that right: these assholes take drugs to weaken their own immune systems, and then take another drug to prevent infection. All because they're scared of something called "rejection." Listen, we're all scared of rejection. I've got a suggestion, morons: stop pissing away society's resources on wasteful signals.

Plenty of other wasteful examples come to mind: antiretrovirals, chemotherapy, antipsychotics, artificial limbs, neonatal intensive care units, and skin grafts. I could go on. Blood transfusions are basically redistribution from the healthy (what we used to call "successful") to the sick and maimed. Did you know that there are drugs to treat high blood pressure and drugs to treat low blood pressure? Make up your mind!

But in a way I'm wasting my time with these examples. I think it's fairly obvious that the field of medicine is mainly a wasteful signal. The larger point is how galling it is that "philanthropists" waste their money providing medical care to people who otherwise couldn't afford it. If you must piss away society's resources on something like a bone marrow transplant, for God's sake, do it on your own dime.

Stoat With Your Feet

2009-08-31T21:49:00.003-05:00

Grobstein is apparently my only source of ideas these days, as one of his links has led me to this post by Ilya Somin on "voting with your feet." The post irritated me enough to provoke this post, but then defused my anger toward the end by acknowledging the obvious point that "voting with your feet" impedes redistribution. Too late, though - I'm geared up to write a post on redistribution and geography.

Somin claims that "voting with your feet" benefits poor people more than rich people. Somin bases this claim on two assertions: 1) it is easier for poor people to move because they have fewer possessions; and 2) it was helpful for southern blacks to have the ability to move out of the South.

I'm a little unclear on what point #2 has to do with the thesis. Point #1 seems relatively weak to me compared to the distributional impact of mobility. I may have blogged about this before - it's a hobbyhorse of mine - but anyway here goes.

Actually, too tired to write the whole post now. So a quick motivating observation, and then I'll finish the thought in my next post.

St. Louis and Baltimore are both characterized by high levels of violent crime, bad schools, etc. Hopefully I won't get any argument when I claim that they are both poor and dangerous relative to other American cities. For instance, they are second and third in murders and non-negligent manslaughters per capita (behind Detroit, which is in Wayne County but which has its own problems). Data here.

They are also independent cities - neither is within a county. Baltimore County and St. Louis County exist, but the cities seceded long ago (Baltimore in 1851 and St. Louis in 1876, if Wikipedia is to be believed). Outside of Virginia, which is idiosyncratic, there are very few independent cities in the United States (but not too much should be made of this, because quite a few cities, while not technically independent, are coterminous with their counties).

I will claim that none of this is coincidence - the poverty, the status as independent cities, the time period during which the cities seceded from their counties. This is all tightly bound up with "voting with your feet," and it throws considerable doubt on the thesis that this phenomenon has been a boon to poor people. But it will have to wait for my next post.

Kidneys and Vietnam

2009-08-29T11:55:00.004-05:00

Grobstein links to this post by Bryan Caplan, who asks why people oppose markets in organs.

I find this kind of stuff obnoxious, but let me take a stab at explaining opposition (a better stab, I hope, than the one Will Wilkinson proposes but does not endorse).

The big tradeoff of a free-market system, I think, is that it greatly increases efficiency (by one particular not-uncontroversial measure) and also puts in place a system that to some extent benefits the rich at the expense of the poor. I believe we should attempt to limit the scope of the market to those areas where we think this tradeoff is worthwhile.

So here's an overwrought hypothetical that I've thought about a bit. It's 1975, and U.S. helicopters are evacuating as many people from Saigon as they can before the Communists arrive. But how should they allocate space on those helicopters? Not everyone who wants to escape can be accommodated.

The obvious answer, to a free marketer, is to sell spaces on the departing helicopters. This has all kinds of pro-efficiency consequences, including providing an incentive for Vietnamese people to work hard and providing an incentive for entrepreneurs to start helicopter-evacuation businesses. Additionally, the revenue could be used to offset income taxes in the United States, which will reduce the deadweight loss associated with all (non-Pigovian) taxes. And of course, willingness to pay just is the way we should allocate resources, under a Pareto-optimizing system (or Kaldor-Hicks or whatever, same idea).

So imagine two men who have worked with the Americans in Saigon and who will definitely be executed if captured by the Communists. The idea here is that one of them will put a higher value on his life than the other, and will pay more to escape. By holding a properly designed auction, we can determine which of these men puts a higher value on his own life, and then rescue that man instead of the other.

And, the free marketer might argue, we can't be sure the richer man will win the auction. Perhaps the poor man is younger, or has a big family, or is just idiosyncratically attached to life. Then he might outbid the richer man, especially if there is a free market in organs or children or something so that he can juice up his bid.

But I suspect that in most circumstances the rich man will win the auction regardless. Willingness to pay, here, doesn't measure much more than total wealth. None of the people crowding the Saigon rooftops was merely casually interested in a helicopter ride out of Vietnam. No one is going to be outbid because of anything other than relative poverty.

So then the question is, what are we trying to maximize? And admittedly there is no good answer. We tend to allocate organs based on things like likelihood of success. So you don't give a kidney to someone whose body is very likely to reject it, and you don't give a liver to someone who continues to drink heavily, regardless of how much those would-be recipients are willing to pay to jump in front of the people ahead of them on the list. We don't let people buy (human) kidneys just to fry them up and eat them, even though I don't see why that would be impermissible in a free-market system.

And yes, the status quo tends to be bureaucratic and human and therefore imperfect and arbitrary. It requires medical professionals to make judgments that we are uncomfortable authorizing anyone to make. I mean, how did the Americans determine which Vietnamese to rescue in Saigon? There's just no good answer. But there are plenty of bad answers, and one of them is to enact a free market in organs.

Risky and Calculating

2009-08-27T20:51:00.002-05:00

So over the last few years I have become a fairly regular reader of Calculated Risk. It's a blog devoted mostly to economics and housing, with a focus on clear presentation of data. At some point, a commenter with the handle "Tanta" was invited to write regular posts, which she did until her death in the autumn of 2008 (I still think of her as Tanta, though it has been revealed that her name was Doris Dungey). Tanta spent most of her career in the mortgage industry and wrote most of her posts about the intricacies of mortgages and related public policy. Many of her posts are compiled here and here.

Anyway, everything I know about mortgages I learned from Tanta, and I thought I would use that knowledge to critique this piece in the New York Times, which was actually linked from Calculated Risk.

The Times seems to have engaged in its incredibly obnoxious habit of changing the headline on an online article. I believe the headline was originally "Adjustable Mortgages Loom as Threat to Housing Recovery" (which is the text under which Calculated Risk linked to it). Now the headline reads "Loans That Looked Easy Pose Threat to Recovery."

The article, under its original headline, caught my eye because adjustable-rate mortgages (ARMs) should not be a problem right now per se. The whole point of ARMs is that the interest rate adjusts as a function of some benchmark, and interest rates generally are extremely low right now. I read the article because I was interested to see why ARMs would be a problem - perhaps because rates will inevitably rise when the recession ends?

But no, it turns out that we're not talking about ARMs generally, but rather "option ARMs." What is optional about an option ARM is amortization - the borrower chooses whether to make the full amortizing payment, to pay interest only, or to pay some specified lesser amount. If the borrower pays less than the interest, then the unpaid interest is added to the principal amount of the loan. After a certain amount of time, or after the principal balance grows to a certain level, the borrower is required to make fully amortizing payments.

Many borrowers used option ARMs as an "affordability product," meaning that they chose an option ARM because they could afford the minimum required payment. But remember, that minimum payment does not even cover the interest on the loan, so if that's all you can afford, you will have an escalating loan balance. Some people considered this a worthwhile risk to take when house prices were rising rapidly and it was easy to refinance into another loan before the higher payments kicked in.

So right off the bat, it's clear that the "option" part is much more troubling than the "ARM" part. And that becomes even more clear as the article profiles Harvey Clavon, who refinanced his home 3 years ago:

Mr. Clavon, 63, was planning to sell the home in a few years and retire to Palm Springs. So he got a loan called an option adjustable rate mortgage, or option ARM, which allowed him to pay less than the interest for the first five years.

On his annual salary of $100,000 as a television camera operator, he could afford the $2,200 initial mortgage payments. And he planned to sell the home before the mortgage reset.

. . .

Because Mr. Clavon made only minimum payments on his mortgage, his balance has risen to $680,000 from $618,000, on a house worth closer to $400,000.

“I don’t know what I’m going to do, ” he said. “I got duped into the loan, and I consider myself an educated man.”

There's a lot going on here, but let me focus on how Mr. Clavon ended up in such a difficult situation. We don't know why he was refinancing his house 3 years ago, but it's apparent that after the transaction he didn't have all that much equity in his house (or so we can assume based on how far underwater he is now). He then proceeded to make only the minimum payments for 3 years, racking up another $62,000 in debt. The housing bubble burst, and he now owes $680,000 on a house worth "closer to $400,00" (which doesn't narrow it down much). Assuming the house is worth $400,000, this means that if he sells it he will have to bring a check to closing to pay off the $280,000 that won't be covered by the purchase price.

Clavon claims to have been duped, but I can't think of a mortgage product that would have prevented this outcome. Clavon's problems are:

1. He didn't have enough money in 2006.

2. The housing bubble has burst and his house lost a lot of value.

3. He doesn't have enough money in 2009.

What kind of mortgage does he think would have solved any of these problems? If he didn't want to have such a large balance to pay off, why did he effectively keep borrowing money by not even paying the interest on his mortgage?

This last question is the key, I think. The truth is that Clavon couldn't afford whatever it is he needed to refinance for in the first place. Therefore he couldn't afford to pay off the debt he incurred in the refinancing, and therefore he only made minimum payments on his mortgage. A more responsible mortgage lender might not have written him an option ARM, but that means he probably couldn't have refinanced at all.

And that's probably what should have happened, but then it's not really the option ARM that has caused Clavon's problems.

Anyway, this doesn't change the fact that option ARMs are a problem in that many of them are toxic and will likely require more foreclosures. But if that's the point the article is trying to make, then I don't see why it spends so many paragraphs, right at the beginning, portraying Clavon as a victim of exotic financial products.

And I should note that I do sympathize with Clavon, who is in a terrible situation. The point here is to think about what can and what can't be blamed on option ARMs. Other than allowing him to live beyond his means, it's unclear what harm they have done to Clavon.

Lalalalalala

2009-08-24T23:17:00.002-05:00

So my preferred way of buying CDs these days is from Lala. In my observation (small sample size), the CDs are cheaper than on Amazon (even taking shipping into account), and Lala throws in a free "online album" or whatever, meaning that once you've purchased the CD, you can also listen to it anytime on Lala for free.

Two advantages: you don't have to worry as much about the physical CD itself, and instant gratification. I ordered 2 CDs today, and listened to both of them repeatedly. I will probably be sick of them by the time they arrive.

Cash for Fuckers

2009-07-31T16:05:00.002-05:00

Maybe it's the sleep deprivation, but I am loving this NYTimes piece on the "cash for clunkers" program. Favorite passages so far:

Some lawmakers succumbed to the temptation to use car-and-road metaphors.

Representative Steve Israel, Democrat of New York, said Americans had taken the program “for a test drive” and liked it. He predicted that $2 billion would be enough until Congress returns in September, but he urged quick Congressional action to minimize public alarm and confusion. And Representative Candice Miller, Republican of Michigan, said the country may be about to turn a corner on its way back to prosperity. “This road is paved by the ‘cars for clunkers’ program,” she said.

And:

In his district in East Texas, he said that Pilgrim’s Pride, a poultry producer, had recently filed for bankruptcy. “Where’s their ‘cash for cluckers’ program?” he asked, liking his line enough to repeat it on the House floor on Friday.

Basically, I think all political stories should engage in snide, bitchy editorializing. It's fucking hilarious, and I genuinely believe that it treats this stuff at the appropriate level of seriousness.

Inelegant

2009-07-24T17:16:00.002-05:00

From a blurb on the front page of the (electronic) NYTimes, linking to this article:

"Anthropologists worry about a possible a wave of cultural extinction among tribes that have long relied on nature, now changing drastically, for survival."

I know, technically only one word is wrong, but it just comes across as so damn awkward. Maybe this is a metaphor for me?

Not Kosher for Passover

2009-06-14T13:26:00.003-05:00

Weird line from the New York Times:

"Graduates heard a similar message at hundreds of colleges this spring, as commencement orators — including actors, executives, poets and heads of state — leavened their congratulatory messages with acknowledgment of the bleak marketplace outside campus."

To me this seems like a novel use of the word "leavened."

War and Peace and the Pacific Northwest

2009-06-13T10:58:00.004-05:00

"In place of the former god-pleasing goals of the peoples - the Jews, the Greeks, the Romans - which the ancients took for goals of the movement of mankind, modern history has set up its own goals - the good of the French, the Germans, the English, and, in its highest abstraction, the goal of the good of all human civilization, usually understood as the people occupying the small northwest corner of a large continent."

-Leo Tolstoy, War and Peace, Part 2 of the Epilogue, translated by Richard Pevear and Larissa Volokhonsky

War and Peace was written before Seattle-centrism had become too prevalent, but clearly the tendency to define Seattle (the core, the metropole) as the essence of human civilization, and everywhere else (the periphery) as backwards, had already begun. Bear in mind, Tolstoy was writing more than a century before Microsoft and Nirvana, and almost a century before the construction of the Space Needle.

I really don't see how anyone can doubt Tolstoy's prescience, or his sense of history.

More Salt for DeLong

2009-06-11T22:05:00.003-05:00

DeLong continues to disappoint, asking, "Can Anybody Tell Me Why Ross Douthat Rather than Hilzoy Writes an Op-Ed Column for the New York Times?"

He refers to this post by Hilzoy.

I should note that I agree with Hilzoy about one thing: Douthat's column is very peculiar. I don't really think it adds a lot - maybe that's the result of not having enough words to work with.

But Hilzoy is grossly unfair or obtuse. He simply can't parse this passage from Douthat:

The argument for unregulated abortion rests on the idea that where there are exceptions, there cannot be a rule. Because rape and incest can lead to pregnancy, because abortion can save women’s lives, because babies can be born into suffering and certain death, there should be no restrictions on abortion whatsoever.

As a matter of moral philosophy, this makes a certain sense. Either a fetus has a claim to life or it doesn’t. The circumstances of its conception and the state of its health shouldn’t enter into the equation.

But the law is a not a philosophy seminar. It’s the place where morality meets custom, and compromise, and common sense. And it can take account of tragic situations without universalizing their lessons.

Hilzoy responds: "First of all, the claim that 'where there is an exception, there cannot be a rule' does not make sense as a matter or moral philosophy."

But Douthat isn't proposing that it makes sense, he's proposing that it doesn't make sense. Hilzoy is in heated agreement with him. And Hilzoy proceeds in this vein for paragraphs, misconstruing Douthat's argument and missing his point entirely.

I don't have the energy to go through the rest, but it's really obnoxious. As I said, this wasn't Douthat's best effort, but if you're going to go after someone you have to have the goods on him. Hilzoy can't even read properly.

And DeLong links to it approvingly. Sigh.

Interestingly, several comments on Hilzoy's post basically point out that he's an idiot (you have to wade through egregious shit to find them, but they're there).

Stonewall Days

2009-06-08T21:37:00.002-05:00

40th anniversary of the Stonewall riots coming up. Read up on them if you don't know what I'm talking about, it's fascinating. What strikes me about it is how unlikely it seems. A mafia-run gay bar with no liquor license in Greenwich Village - and now, Iowa and New Hampshire.

Department of Analogies

2009-06-06T22:18:00.002-05:00

Sarang, in comments, says:

"I should point out that I _don't_ think my objections are of the pedantic-asshole type. As I see it, the macro-regularities follow certain laws and the micro-regularities follow some, apparently entirely different, laws. You can pretend that these sets of laws are 'continuously connected,' but as far as I can tell, they are entirely different, and also as far as I can tell, there's a watershed at say N = 10000 people at which the micro-laws cease to be continuously connected to the macro-laws."

No one is accusing Sarang of asshole pedantry (pederasty is another matter). But let me say what I think Tolstoy's analogy is and isn't doing.

I think Tolstoy is primarily objecting to the idea that particular events happened because Napoleon did one thing and not another. And indeed, Napoleon did have command of an empire, and his whim really did matter. But Tolstoy would say, I think, that Napoleon's control of his empire, and his army, depended on everyone obeying his orders, which in turn depended on their own decisions, their own "will." You can't understand the French invasion of Russia merely by reference to Napoleon's ambitions.

A true account of the French invasion would be much more fine-grained. Why did each soldier choose to obey his orders (or why did some desert, or whatever)? Why did gun-makers make the necessary guns? Why did so many non-French serve? etc. etc.

But anyway, I think continuity of historical theories is actually a red herring. It may be that as you include more and more dimensions in your model, you get discontinuities, and I don't think it matters. The point is to abandon crude, "discrete" accounts of history and embrace the multitude of factors that come into play. In my analogy, to zoom in, to take a close look at each section of coastline, to avoid the easy "because Napoleon said so" answers.

And I think ultimately the upshot is that history is intractable. History is the confluence of so many individual decisions and outcomes that the only true depiction of the world is the world itself. One can only zoom in so far before outstripping one's data and ability to process it. And this is my problem with Tolstoy's stance - I think he overreacts to the "great man" theories of history that repulsed him. In a sense, he was dealing with the same issues that Krugman deals with in, again, my favorite Krugman essay.

You understand history as well as you can with the tools you have. But remember, Tolstoy was writing at a time when it was becoming feasible to understand things much better than previously. His desire for a more continuous account of history is entirely understandable and defensible.

And, finally, the literalism of his analogy - sure, he doesn't seem to have been up to speed on calculus (though who am I to criticize?). But War and Peace is a novel (or an epic, or whatever Tolstoy thought it was). And this isn't a case of Tolstoy making sweeping statements about a discipline he knew nothing about, as with the Sokal hoax. In the first place, Tolstoy isn't commenting on mathematics, he's commenting on history, which, given the setting of War and Peace, I think he earned the right to do. Additionally, I think his commentary is at the very least coherent and informed, which is apparently not true of the commentary protested by Sokal.

So I don't think literalism is called for. At the very least, I feel that I got something out of the analogy. It reflects the philosophy that Andrei had embraced during the invasion, and I think it's something we've all thought about in one form or another. I'm actually thrilled to be able to see something the way Tolstoy saw it, even if I can't be sure that I precisely appreciate his point.

You're Not The Only One Who Can Play This Game, Tolstoy

2009-06-06T15:13:00.002-05:00

How about this for an analogy? I draw this idea from Neal Stephenson's Mother Earth Mother Board:

"The basic problem of slack is akin to a famous question underlying the mathematical field of fractals: How long is the coastline of Great Britain? If I take a wall map of the isle and measure it with a ruler and multiply by the map's scale, I'll get one figure. If I do the same thing using a set of large-scale ordnance survey maps, I'll get a much higher figure because those maps will show zigs and zags in the coastline that are polished to straight lines on the wall map. But if I went all the way around the coast with a tape measure, I'd pick up even smaller variations and get an even larger number. If I did it with calipers, the number would be larger still. This process can be repeated more or less indefinitely, and so it is impossible to answer the original question straightforwardly. The length of the coastline of Great Britain must be defined in terms of fractal geometry."

So how about this: asking why some historical event happened is like asking what the length of Great Britain's coastline is. It is not a meaningless question, but it has no unique answer - the precise answer will depend on the frame of reference, how "zoomed in" you are to the map of Great Britain. And any answer is at best an approximation, because one cannot zoom in infinitely far. Discreteness will always remain.

And in fact, there is a tradeoff between precision and feasibility. If you simply connect points on Great Britain's coastline with mile-long segments and add up their lengths, you are missing a lot of inlets and protuberances, but you have a relatively easy task. This sort of tradeoff is one of the themes of my own favorite Krugman essay, The Fall and Rise of Development Economics.

Tolstoy's Math

2009-06-06T14:58:00.003-05:00

Sarang, in comments, derides Tolstoy's analogy between math and history. I am inclined to cut Tolstoy some slack, because I quite like the analogy. But it does seem to be true that you don't need much math to show that the Achilles-tortoise "paradox" is not paradoxical at all.

Imagine that Achilles runs at 1 meter per second, while the tortoise runs at 0.1m/s. Imagine that Achilles starts 1 meter behind the tortoise. Then in one second, Achilles will have reached the place the tortoise started, but the tortoise will have advanced 0.1 meter. In another 1/10 of a second, Achilles will have reached this point, but the tortoise will have moved on. Hence the "paradox."

So set t = to the amount of time that it will take Achilles to catch the tortoise. It will take him one second, plus 1/10 of a second, plus 1/100 of a second, and so on.

t = 1 + 0.1 + 0.01 + 0.001 + ....

Set m = 0.1 + 0.01 + 0.001 + ...

So t = 1 + m.

Now multiply both sides by 10.

10t = 10 + 10m = 10 + 1 + m

Now subtract t from 10t:

10t - t = (10 + 1 + m) - (1 + m)

9t = 10 + (1 + m) - (1 + m)

9t = 10

t = 10/9

So apparently Achilles will catch the tortoise in 10/9 of a second.

Sarang, have I fucked something up?

LBJ and Tolstoy

2009-06-06T14:49:00.002-05:00

Since I have already quoted from Robert Caro's The Years of Lyndon Johnson: Master of the Senate and from War and Peace today, why not close the loop? This is from p. 59 of The Years of Lyndon Johnson: Means of Ascent:

Even at Longlea [the Virginia estate of Charles Marsh, patron of LBJ, and his wife Alice Glass, mistress of LBJ, unbeknownst to Marsh], there were hints - although the Longlea "regulars" didn't notice them. She [Lady Bird Johnson] seemed always to be reading. One summer was to become enshrined in Longlea lore as "the summer that Lady Bird read War and Peace"; the scintillating Longlea regulars snickered because the quiet little woman carried the big book with her everywhere - even though, by the end of summer, she had finished it. When, during the loud arguments to which she sat silently listening, a book would be cited, Lady Bird would, on her return to Washington, check it out of the public library. One was Mein Kampf, which Charles Marsh had read, and to which he was continually referring. She read it, and while she never talked about the book at Longlea, when Hitler's theories were discussed thereafter, she was aware that, while Marsh knew what he was talking about, no one else in the room did - except her.

Krugman and Tolstoy

2009-06-06T14:19:00.002-05:00

And, apropos of my previous post on Tolstoy's view of history, Krugman is in the habit of quoting Colin McEvedy's mathematical view of history. Here is Krugman reviewing The Great Wave: Price Revolutions and the Rhythm of History, by David Hackett Fischer, in Foreign Affairs:

And the book starts well, with an eloquent and stirring defense of the role of quantification in history (although my favorite along these lines is still Colin McEvedy's introduction to The Penguin Atlas of Ancient History, which contains this immortal sentence: "History being a branch of the biological sciences, its ultimate expression must be mathematical").

It is perhaps worth mentioning Krugman's professed reason for becoming an economist: he wanted to emulate the psychohistorians of Isaac Asimov's Foundation series, using quantitative methods to grasp historical truths (or so I understand - I have only read one book in the series). See also. And also.

Continuity and History

2009-06-06T13:43:00.004-05:00

And while I'm quoting amazing passages, I love this one from volume III, part 3 of War and Peace by Leo Tolstoy (as translated by Richard Pevear and Larissa Volokhonsky):

A well-known so-called sophism of the ancients posits that Achilles can never overtake a tortoise that is walking ahead of him, even though Achilles walks ten times faster than the tortoise: while Achilles covers the distance that separates him from the tortoise, the tortoise will get ahead of him by one tenth of that distance; Achilles covers that one tenth, the tortoise gets ahead by one hundredth, and so on to infinity. The ancients considered this problem insoluble. The nonsensical conclusion (that Achilles will never overtake the tortoise) resulted only from the fact that discrete units of movement were introduced arbitrarily, while the movement of both Achilles and the tortoise was continuous.

By taking smaller and smaller units of movement, we only approach the solution of the problem, but never reach it. Only by allowing for an infinitesimal quantity and the ascending progression from that up to one tenth, and by taking the sum of that geometrical progression, do we arrive at the solution of the problem. A new branch of mathematics, having attained to the art of dealing with infinitesimal quantities in other, more complex problems of movement as well, now gives answers to questions that used to seem insoluble.

This new branch of mathematics, unknown to the ancients, in examining questions of movement, allows for infinitesimal quantities, that is, such as restore the main condition of movement (absolute continuity), and thereby corrects the inevitable error that human reason cannot help committing when it examines discrete units of movement instead of continuous movement.

The same thing happens in the search for the laws of historical movement.

The movement of mankind, proceeding from a countless number of human wills, occurs continuously.

To comprehend the laws of this movement is the goal of history. But in order to comprehend the laws of the continuous movement of the sum of all individual wills, human reason allows for arbitrary, discrete units. The first method of history consists in taking an arbitrary series of continuous events and examining it separately from others, whereas there is not and cannot be a beginning to any event, but one event always continuously follows another. The second method consists in examining the actions of one person, a king, a commander, as the sum of individual wills, whereas the sum of individual wills is never expressed in the activity of one historical person.

Historical science in its movement always takes ever smaller units for examination, and in this way strives to approach the truth. But however small the units that history takes, we feel that allowing for a unit that is separate from another, allowing for the beginning of some phenomenon, and allowing for the notion that all individual wills are expressed in the actions of one historical person, is false in itself.

Any conclusion of historical science, without the least effort on the part of criticism, falls apart like dust, leaving nothing behind, only as a result of the fact that criticism selects as an object for observation a larger or smaller discrete unit, which it always has the right to do, because any chosen historical unit is always arbitrary.

Only by admitting an infinitesimal unit for observation - a differential of history, that is, the uniform strivings of people - and attaining to the art of integrating them (taking the sums of these infinitesimal quantities) can we hope to comprehend the laws of history.

So Say We All

2009-06-06T13:26:00.002-05:00

I have no idea if this is where the Battlestar Galactica phrase originated, but it's a hell of a paragraph anyway. From p. 696 of The Years of Lyndon Johnson: Master of the Senate, by Robert Caro (I have not amended his use of the term Negro):

For three days that December, the Supreme Court heard arguments on Brown, and five months later, on May 17, 1954, the Court ruled that separation of races in schools violated the Fourteenth Amendment's pledge of equal protection of the law, "that in the field of public education, the doctrine of 'separate but equal' has no place. Separate but equal facilities are inherently unequal. . . . To separate them [Negro children] from others of similar age and qualifications solely because of their race generates a feeling of inferiority . . . that may affect their hearts and minds in a way unlikely ever to be undone." The Court's Chief Justice understood as Lyndon Johnson understood the importance of unanimity, and Earl Warren had obtained it - even from Justice Stanley F. Reed of border-state Kentucky. Reed, who had been the last holdout, was looking down from the bench at Thurgood Marshall, who had led the fight in Brown, when Warren uttered the words, "So say we all." Reed "was looking me right straight in the face, because he wanted to see my reaction when I realized he hadn't dissented," the great black attorney would recall. The two men exchanged nods, barely perceptible. But there were tears on the Justice's face. All across the United States black men and women knelt to give thanks to God.

Don't Trust Anyone Who Doesn't Understand Section 1129

2009-06-05T17:28:00.004-05:00

Will121 says in comments:

"Regarding the errors at the start of the piece I'll just mention that when this guy blogged about finance, I'd pointed out that he often had no clue about what he was talking about. Now that he's mentioning someone in your profession, you've come to the same realization."

Will121 is referring to my previous post, in which I pointed out that the first sentence of Brad DeLong's recent piece contains two glaring (and so far uncorrected) errors.

Fair enough. It is clear that DeLong often indulges his temptation to write about things he doesn't know anything about (ironically, a very Posnerian tendency). For instance, is he under the impression that ~~Carbozo~~ Cardozo was a good judge? Or is he being ironic? [Carbozo joke stolen from a law school professor]

Either way, lesson learned. Big grain of salt going forward.

And an even bigger grain of salt for Felix Salmon, who defended the GM 363 sale with this logic:

"As far as I can make out, the main legitimate complaint of the GM bondholders is that they’re getting paid out less than other unsecured creditors (specifically the UAW) with whom they’re pari passu. But I don’t think there’s a legal right anywhere for all pari passu creditors to receive exactly the same treatment. If you owe money on four different credit cards, there’s no law saying you have to pay them all the same proportion of the total amount outstanding."

Sigh. As is often the case, this is a complicated issue, and if one were inclined to be charitable, one could support a version of this argument. There are all kinds of situations in bankruptcy in which claims with identical priority are treated differently.

But this does not mean that a debtor can crudely pay some unsecured claims more than others. It's awfully hard to embrace the idea that, for instance, you could pick and choose which credit card debts you were going to pay off in bankruptcy and which you weren't. Or confirm a plan of reorganization providing for the payment in full of your trade debt but leaving a pittance for your unsecured notes. Again, there are ways of achieving these outcomes, but they involve mechanisms that serve other bankruptcy purposes. They are exceptions to the general principle of equality of recovery among claims of identical priority.

I could go on, but it's not that interesting - the point here is that once you catch someone confidently misstating the way things work, it's awfully hard to trust him again. So maybe I shouldn't really trust anyone until I have read something he wrote about bankruptcy.

Quick What the Fuck

2009-06-03T21:47:00.002-05:00

Get your facts straight, DeLong:

"Richard Posner, leader of the Chicago School of Economics and Fourth Circuit Court of Appeals judge, uses his new book, “A Failure of Capitalism,” to try to rescue the Chicago School’s foundational assumption that the economy behaves as if all economic agents and actors are rational, far-sighted calculators."

Leader of the "Chicago School of Economics"? Really?

Fourth Circuit Court of Appeals judge? Really?

Encountering two glaring errors in the first sentence of a piece is not a good sign.

The Next Chapter

2009-05-31T22:27:00.003-05:00

[ill-considered post removed; replacement will be up soon]

The Lives of Mammals

2009-03-17T23:18:00.002-05:00

The fox knows many things, but the hedgehog knows one big thing.

Malcolm Gladwell is a fox. I think I saw him once on the Lower East Side, but maybe not. Anyway, I mostly admire his work, but unfortunately he seems to be operating with no bullshit filter.

I have added a link to Microkhan, Brendan Koerner's blog. Koerner is definitely a fox.

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Brendan Koerner

Colbert Report Full Episodes
Political Humor

Mark Sanford
NASA Name Contest

I have mixed feelings about Koerner's extreme embrace of foxiness. He clearly has a good eye for fascinating minutiae, but wouldn't it be better if he dug a little deeper? I mean, he's written a book, so it's not as though he's incapable of running an interesting idea to ground. But his blog seems frenetic, darting here and there. Like a fucking fox. I guess I'll try reading some of his published articles and whatnot, maybe it's all a balance.

And indeed, we need foxes as well as hedgehogs. But we also need insight, and I think Koerner is the kind of guy who could get a lot out of some of these ideas.

Not Ideas About Blogging But the Thing Itself

2009-03-17T21:59:00.003-05:00

Bloggers piss me off sometimes. I think what gets me the most is the overconfidence and certitude. Bob Rubin wrote that he has met people who are more sure about everything than he is about anything. I find myself in the same boat quite often.

Take thisvalue-laden post from Megan McArdle. Her basic argument is that walking away from a non-recourse mortgage is morally wrong. The context is that house prices have dropped significantly since a lot of these loans were made. If a loan is non-recourse, then you can end all your obligations by handing over the house. This makes economic sense if the outstanding balance on the mortgage exceeds the value of the house by a large enough margin. However, whether or not it makes sense to walk away, McArdle thinks it's morally wrong, in that the borrower isn't paying the debt in full.

Bear in mind, there do exist recourse loans. The ability to walk away from a non-recourse loan isn't some loophole sprung upon the unsuspecting lenders. Also, Megan makes an exception for people who declare bankruptcy. However, nothing in the Bankruptcy Code prevents debtors from repaying their debts after they have emerged from bankruptcy protection, and the Bankruptcy Code does not purport to discharge the moral, as opposed to legal, obligation to repay debts.

As the bankruptcy example shows, it is easy to complicate the question. If the moral obligation to repay debts is absolute, then should borrowers never take advantage of, say, the lender's failure to act within the statute of limitations? If I'm morally required to fulfill my contractual promises, where does that leave the concept of efficient breach?

These are normative questions, so they are inherently bullshit. But you can engage the difficult points, the full implications of your position, instead of giving a tendentious example and picking on the other side's weak points. It all just feels very college-y, and particularly college debate-y. Unfortunately, that seems to be a big part of what it means to be bloggy.

And yes, I've been known to engage in the occasional obnoxious debate tactic. Normativity is dead people, get over it.

Water, Water Everywhere

2009-03-17T12:16:00.002-05:00

I am feeling especially guilty today. Why? Because I learned that I use an unconscionably high percent of New York's water supply.

Here's the line that has me worried:

"One is the Croton Water Filtration Plant in the Bronx, which will provide up to 290 gallons a day of filtered water — up to 30 percent of the city’s water needs — from the Croton watershed in Westchester and Putnam Counties."

So by my calculation, this means that the city needs about 966.7 gallons of water a day. Now, that's a lot of water - in fact, it's impossible to picture that much water, just as it's impossible to imagine what $1 million would look like. It's a good thing New York is in a high-precipitation region. Think how difficult it would be to procure 966.7 gallons a day in a dry region like southern California.

Here's the thing, though. I probably use an average of 30-40 gallons a day. There's my shower, obviously, but also drinking water, cooking water, laundry, dishes, etc. This means that I use 3-4% of New York's water every day. In a city of 100 people, no one person should be using more than about 1% of the city's water on any given day. I'm way over my share - in fact, I'm using as much water as 3-4 New Yorkers, on average.

And that's assuming that New York City has a population of 100. To be more accurate, we would have to use its actual population, which is over 8 million.

The Haughty and the Naughty

2009-02-25T23:25:00.003-06:00

A rare miss for Dan Savage as he misinterprets a question:

I am at a heavy-metal show at a dive bar as I write this. There are tons of guys I consider hot here, 98 percent of whom, I’m sure, are straight. But I got a vibe off this one guy. This is such a macho environment, though, that there’s a considerable amount of danger in asking the question, “So, you gay?”

I remember an episode of Law & Order where Jerry Orbach tried to determine if a suspect was in AA by asking a secret question. Something like, “Are you a friend of Bill W.?” The idea was that the question was innocuous if you weren’t in AA.

Since you are the king of “santorum” and “pegging” and “saddlebacking,” I thought maybe you could invent a secret question for masculine gay men in masculine environments. Something like, “Hey, do you like to barbecue?” So how ’bout it? Can you declare the official secret are-you-a-masculine-gay-guy question?

Men Are Cute Hot Objects

The best I could come up with on my own, MACHO, was this: “A Little Night Music—original Broadway cast recording or original London cast?” But that line will get your ass kicked in a lot of gay bars—as I know from bitter experience. So let’s toss this out to my readers, the folks who came up with the definitions for “santorum,” “pegging,” and “saddlebacking”: Okay, gang, we’re looking for an innocuous question that 1) all fags everywhere would know the answer to but 2) no straight guys anywhere would. My long-suffering interns—their uniforms chafe—await your suggested questions at mail@savagelove.net.

Obviously Dan's correspondent wants an arbitrary code that gay people can use to identify each other. Hence the barbecue example. There's nothing gay about wanting to savor the feeling of some meat in your mouth - the point is to decide on something that could plausibly come up randomly but that is specific enough that gay people who are clued in can pick up on it. "Do you like barbecue?" is only okay, because when are you going to be able to use a line like that without sounding ridiculous? Also, how is a gay person supposed to answer? A straight person could plausibly answer "yes" or "no," so neither answer tells you much. You want a question like, "What is your favorite kind of beer?" so that the gay answer can be "coffee porter" or something. A few straight people are going to say "coffee porter," but few enough that the level of false positives will be low. However the question is not ideal because it's not exactly a natural thing to bring up in many settings.

But what MACHO doesn't want is a question that can weed out the gay from the straight, only at the expense of outing the questioner. Dan thinks the guy wants a question that only a gay person would know the answer to, but that's only half of the equation, hence the need for a code.

New York Fucking Times

2009-02-06T21:36:00.002-06:00

You are going out of business because you suck at life.

Actually, that's not true, but check out this passage from an otherwise well-written piece:

"However, small artisanal operations, which are generally based in a single community, compose a substantial portion of the world’s total fishing effort. They employ 50 of the world’s 51 million fishermen, and take half of the world’s annual catch."

Now, I sort of see how 50 and 51 could be parallel. Each could modify "million." But I'm not buying it. Anyway it's much funnier my way.

New Links

2009-02-01T01:39:00.003-06:00

You may notice some new links to the left. I am reluctant to link to the New York Times blogs, because... they're New York Times blogs, but I find myself reading them fairly often, and I guess that's what counts.

I was this close - this fucking close - to getting rid of my Strangemaps link, but this post makes up for all of the shitty maps and shittier writing. Because it makes you think.

Just Another Reason to Hate PETA

2009-01-27T22:33:00.002-06:00

PETA is one of those organizations that is so counterproductive you begin to think it must be funded by the opposition. Anyway, there they go again (link from Grobble).

Of course the big problem with the ad is that it's demeaning to women, but it's also demeaning to those vegetarians who, like me, are horrible lovers.

This Is Why You're Issuing 14% Junk Bonds

2009-01-21T00:33:00.004-06:00

So the Times published a list of questions for Timothy Geithner, Obama's nominee for Secretary of the Treasury. The questions were solicited from "experts in finance and economics." What I love is that the experts' pursuit of their own agendas hilariously undermines the exercise.

[UPDATE: I should add that Anna Schwartz seems to ask decent questions, except that I think she might be leaving out some relevant information about the Resolution Trust Corporation - namely the nationalization part. Most of the others are tendentious or ridiculously vague. Mitt Romney's first question is decent, but he remains the candidate I'd most like to get into a bar fight with, thanks to his second and third questions.]

So Mankiw asks, "President Obama supports the estate tax. Why should a person who leaves his money to his children pay more in taxes than another person with the same lifetime income who spends all his money on himself?"

And it's like, what the fuck? Is this really the information you want from the man who has been nominated to run the Treasury Department during the depression? Why not go ahead and ask him why it's safe and legal a day before the child is born, but murder a day after? Isn't it a fact that it's always murder, Mr. Geithner?

I also love this one from Roger Myerson, a Nobel-winning economist:

"Should debt securities that are held by regulated banks and pension funds be rated by multiple independent credit reports that have been commissioned by a federal agency, or should we continue to let the issuers of debts decide who will rate their risks?"

Myerson could be a law & econ superstar, because he has mastered the leading question. Give him credit, though, at least it's a live issue as we head into what will almost certainly be large-scale regulatory change.

Every Once In a While Things Work Out

2009-01-13T01:31:00.003-06:00

So I get home at 1:30 in the morning, not having eaten dinner, and there's barely any food in the apartment. What do I do?

I heat up some butter in a frying pan, fry two eggs (over easy), then put them on a tortilla with some grated pepper jack. I fold the tortilla over and brown each side. Then I eat the whole thing with some fucking Cholula sauce.

Delicious. Not the healthiest thing I've ever made, but not horrible either. Plenty of nutrients, just a little high on fat. Wash the whole thing down with apricot-flavored beer (not sure why it has such a poor rating, it is delicious). Beer is actually quite healthy, incidentally.

I guess what I'm trying to say is, tonight everything worked out. Often I would have just gone to bed hungry, but not tonight.

It Was Only a Kiss

2009-01-02T20:32:00.002-06:00

Ladies and gentlemen, the Killers.

Now they're going to bed
And my stomach is sick
And it's all in my head
But she's touching his [rhymes with sick]

Actually, the lyric is "chest" - she's touching his chest now, he takes off her dress now, let me go.

At the Fucking Vanguard

2008-11-19T10:27:00.003-06:00

I want to start off by pointing out that Vanguard is an excellent company, and I use it to invest my own money. Nothing in this post is meant as a criticism of Vanguard, except that they do seem to have been mildly aggressive with some of their funds. On the whole, though, Vanguard is a model of responsibility and low-cost investing.

Vanguard has these funds that are designed to shift strategy over time so that they remain appropriate over the investor's life. So each fund starts out aggressive and then gets more conservative as the retirement date approaches. You could roughly replicate this by shifting among Vanguard funds over time, but the target retirement funds are meant to be easier. Also, you can mix and match to reflect your risk preference. Maybe you're retiring in 2020, but you want to invest as if you were retiring in 2015 so as to be on the safe side. Here are the year-to-date returns for some of Vanguard's funds:

retirement date of:

2005: -20.38%
2010: -25.46%
2015: -28.87%
2020: -31.79%
2025: -34.77%
2030: -37.47%
2035: -39.12%

Beyond that they're basically all the same. Of course these numbers change frequently, and I don't want to imply that we can draw hugely confident conclusions from these particular numbers. But I think a few things are clear:

1. If you use these funds, then your money really does seem to be safer as you near retirement. People who are retiring in 2030 have plenty of time for the markets to recover or, if they don't, to adjust their savings and retirement plans. People who retired in 2005 lost a lot less money, which is good because they can afford it less.

2. Still, those 2005 retirees lost 20% of their money so far this year. Now, presumably you wouldn't put all your money in one of these accounts, but it's not clear that a retiree would have a whole lot of money invested elsewhere. I'm not saying this is necessarily too risky an investment strategy - maybe that's the right level of aggressiveness for someone who has, what, maybe 15 years left to live. Maybe you want to take on that much risk so that you can get higher returns on average, and it just happened not to work out this time. But note that most bond funds (with the obvious exception of junk bonds and the less-obvious exceptions of intermediate- and long-term investment grade bonds) are either mildly up or mildly down for the year - which is to say, about 20% better than the Target Retirement 2005 fund.

But this points to the very real dangers of life as a private investor. To get significant returns (on average), you have to take on significant risk. The Target Retirement 2005 fund must have significant holdings in bonds - the whole point is that it's at a low-risk point in its investment cycle. A responsible investor can do everything right and still lose 20% in a very short period of time.

I think this has some bearing on the Social Security debate, but basically that is just an extremely low-risk, low-return, mandatory savings program, and I'm not sure that's justified by the data I've presented. I guess my point is that a lot of people probably take on more risk than they really think they're taking on, and the consequences can be pretty tragic. These people don't have time to adjust, or to work a little longer, or whatever. And Vanguard is a damn good company, so it's not as though these people bought junk bonds or something.

We Are All Grobsteinians Now

2008-11-19T10:16:00.002-06:00

John Maynard Keynes wrote this in 1936 (emphasis in original):

Britain should build up its naval strength and wait for the dictators to make mistakes.

I get a kick out of this - it has an element of absurdity that I associate with Grob's sensibilities. As if you could sort of sit back, wait for the Germans to send their entire navy to the Irish Sea or something, and then - BAM - victory!

Of course, I've ripped this sentence out of context, but that's how you do it people, that's how you do it.

There Is a Spectre Haunting GM

2008-11-19T06:56:00.002-06:00

A big debate has commenced about the fate of GM. On the left, you have various people pissing me off with their sloppy reasoning and overall ridiculousness (the Cohn piece is better-reasoned but, I feel, deceptive about the tradeoffs we face). Right-wingers simply don't want a bailout, arguing that it wastes money, creates bad incentives, and may create "zombie firms" that soak up resources and function poorly. For once, I agree - you really don't want to be propping up failed businesses as a general matter.

I do think the leftists are right about one thing - a rapid liquidation of GM at this moment in time would be disastrous. The credit markets are not fully functional, and firms in bankruptcy need cash to operate. The worry is that in the current environment, chapter 11 won't provide much relief and GM will simply implode. Now is a very bad time to be laying a bunch of people off, particularly if GM is more valuable as a going concern (or if pieces of it are more valuable as going concerns - an orderly liquidation might not be so bad, because most of the factories can keep operating, just under different ownership).

An idea has started floating around the world of bankruptcy - maybe the government should provide financing for GM to operate in bankruptcy. The name for this is debtor-in-possession (DIP) financing. The idea would be to give GM a real shot at a chapter 11 reorganization, taking advantage of the bankruptcy system's long experience in running reorganizations.

Conservatives have seized on this idea. Their motives may or may not be pure - this may be the smallest bailout they think they can get, even though they would prefer nothing at all. They also may like the fact that collective bargaining agreements can be abrogated in bankruptcy more easily than outside it.

Ultimately, whatever their reasons, I think the conservatives are right on this one. They are drawing on the things that smart bankruptcy professionals and academics are saying (the first person I know to have floated the idea was Douglas Baird, on CNN, but others might have talked about this previously). The New York Times had two pieces making the case for a bailout in the form of a DIP loan. And the conservatives aren't the only ones in the political sphere who see the logic of a government-backed DIP loan - Matt Yglesias is presumably on board as well.

Ultimately, the logic is almost too obvious. Chapter 11 embodies our knowledge and our policy choices about dealing with insolvency, and GM is insolvent. We've made our choices about insolvency, now it's time to act on them.

You Cannot Be Serious!

2008-10-03T14:37:00.002-05:00

A little lesson: when comparing two things, use a comparative adjective, such as "better" or "latter." When comparing three or more things, use a superlative adjective, such as "best" or "last." Do not use "latter" to describe the last word in a list of more than two items.

Courage.